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Daily ShareChat: TrustPower

By Jenny Ruth

Wednesday 27th April 2011

Text too small?

TrustPower could potentially irrigate 80,000 hectares of farmland and the internal rate of return will be in the 14% to 16% range, says Andrew Harvey-Green, an analyst at Forsyth Barr.

"With the total investment potentially as high as $400 million, we estimate that the value uplift from the irrigation is in the order of 10 cents to 30 cents per share," Harvey-Green says.

TrustPower recently completed its fist irrigation investment involving pumping relatively small quantities of water from the Rakaia River which cost about $14 million.

"The end game involves using Lake Coleridge storage to increase the reliability of water for irrigators on both the southern and northern sides of the Rakaia River," Harvey-Green says.

"Whilst the potential is significant, the hurdles to overcome include getting the Water Conservation Order for the Rakaia River changed, getting buy-in from local farmers that its proposals are the best available for the farmers dealing with potential land use changes," he says.

"We do not see these issues as insurmountable. However, water quality and water use are hot topic in Canterbury and so it will take some time to resolve all the issues."

For that reason, he has only included three cents for the irrigation scheme in his $8.26 per share valuation.

Recommendation: Buy.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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