Contractor’s dispute ramps up dam bill by $8.3m

Monday, 22 July 2024

The Waimea Dam’s projected cost has once again risen, this time to the tune of $8.3m, a hike stemming from an adjudicator’s decision in a dispute with the contractor, the Tasman District Council has heard.

And it’s a bill that could increase, with dam representatives admitting that the total cost and duration of the dispute is as of yet unknown.

In Waimea Water’s presentation of its updated Statement of Intent to the council on Wednesday, the forecast project cost was $206.5m.

“As of today we’re about $202m, the forecast is up to $206m and the contractor’s dispute remains a risk for us,” Waimea Water chief financial officer Dave Ashcroft told councillors in Wednesday’s full council meeting.

Fulton Hogan and Taylors Contracting, the joint-venture contractor, initiated adjudication with Waimea Water in 2022 in a dispute over the independent engineer's decision.

Councillor Mark Greening asked for an explanation as to what had driven the cost increase from $198m to $206m.

Waimea Water board director Doug Hattersley said one of the disputes was $8.3m, the determination from an adjudication, and that provided the $206m, however, only $202m had been spent to date.

Greening asked when the contractor dispute would likely end, and the extent of the total amount that was being disputed.

However, Hattersley explained he wasn’t able to comment, as the situation was ongoing.

“That’s just one of them, we don’t know anything else,” he said.

Greening said his impression was that no one knew what the “quantum”, or amount was going to be, which Hattersley confirmed as correct.

Councillor Chris Hill asked, in terms of process, if adjudications could be interim and non final, and then matters would be further explored in arbitration, to which Hattersley confirmed that, yes, that was the process.

Hill responded that that “may have some bearing on the numbers”, while Tasman mayor Tim King said there was a significant amount of process yet to play out in regards to the issue.

According to a presentation to the council in October last year, the residual risks to the dam that remained included: ongoing unexpected contractor claims, the contractor disputing the decisions of the adjudicator and independent engineer, and the nine disputes elevated to final and binding arbitration.

Waimea Water was preparing for more than two years of disputes, the presentation said at the time.

Group manager finance Mike Drummond, speaking about the Waimea Water Limited’s Final Statement of Intent, said water charges were around $216,000 higher than what the council provided for in the Long Term Plan, which would cause a funding shortfall this year.

Drummond said most of the additional cost came from financing costs in relation to an irrigator capacity loan, which the council was responsible for until June 30, 2026.

The interest costs on that portion of that irrigator loan were met from general rates, he said.

That would mean the council would need to collect an additional $216,000 from general rates in the next financial year, he said, though he couldn’t yet estimate what the impact on rates would be.

The Tasman District Council owns 51% of the dam, with 49% owned by Waimea Irrigators, who represent about 200 shareholders – a mix of horticultural growers, lifestyle block owners and three dairy farmers, across a catchment of 5000 hectares.

Waimea Water and the joint-venture contractor have not seen eye to eye on multiple occasions.

In letters leaked to the Nelson Mail in 2021, each party pointed the finger at the other over delays with the project.

Councillor Glen Daikee also asked at the meeting if any consideration had been given to electricity generation at the dam lately.

Ashcroft said irrigators were keen to look at it, but no decision had been made yet.