Controversial Waimea dam more than double projected cost

The final cost of the controversial dam is $211 million, double the $104.5 million projected cost when the Tasman District Council voted to go ahead with the project in 2018. Photo: Supplied / Tim Cuff

The final cost for the Waimea dam has come in at double the initial forecast.

Waimea Water Limited (WWL) announced on Monday that the final cost of the controversial dam is $211 million, double the $104.5 million projected cost when the Tasman District Council voted to go ahead with the project in 2018, and nearly three times the $75.9 million price it consulted on in 2017.

WWL also announced a resolution in its legal wranglings with dam construction contractor Fulton Hogan, but declined to give the cost of the settlement.

The dam in Tasman's Lee Valley, completed in April last year holds 13 million cubic litres of water.

It had been beset with delays and controversy since work began on potential dams in the late 1970s, with planning for Waimea crystallising following the 2001 drought.

The project was scuppered by a council vote in 2018, then revived by another vote a month later.

Work got underway in 2019, with the dam expected to start operating in 2022, but geological issues and the Covid-19 pandemic both contributed to delays.

An economist who had long argued the cost of the dam would grow was unsurprised at the final price.

Ropere Consulting economist Peter Fraser said large infrastructure projects - particularly dams - almost inevitably go over budget in New Zealand, and international research also indicated the vast majority of dam projects go well over cost.

"In 2015, Oxford University put out a major study of major dam construction projects across approximately 60 countries over about 50 years, and covered over 200 damns - they found the expected average cost overrun was over 90%."

Fraser said the dam was never going to be good value for money and said much of the costs would land on Richmond ratepayers - but had been a great deal for a small group of farmers.

"This is the biggest subsidy to a small group of farmers probably in New Zealand's history, because they have been completely insulated from all the price increases," he said.

"We have the classic situation where we privatise the profits and socialise the costs - and the way those costs have been socialised is on the ratepayers of Richmond."

Waimea Water chief executive Mike Scott said the project had four curveballs that impacted the total cost including geotechnical issues, the Covid-19 pandemic, construction delays and a high inflation environment. Photo: LDR / Tim Cuff

Waimea Water chief executive Mike Scott disputed Fraser's claim.

"The irrigators are paying their share of the project through debt and equity - the interest on that debt flows through to their water charges."

Scott said the project had four curveballs that impacted the total cost including geotechnical issues, the Covid-19 pandemic, construction delays and a high inflation environment.

"The encountered geology was different from what we expected, which was about half the cost increase. Covid-19 threw us around a lot - bear in mind this is the first publicly funded large scale dam project in about thirty years in arguably some of the most challenging times to build a project since World War II."

He said the dam would do a lot for the region, increasing the productivity of the Waimea Plains.

Scott said 20% of the reservoirs water was released over a six week period during the drought at the start of 2024, which he felt went some way to demonstrate the dam's value and lessen some of the deep division that had sometimes marked sentiment towards the project.

"It did it's job last year and has had a significant positive impact on the economy and river health."

He declined to disclose the cost of the settlement reached with contractors Fulton Hogan - which WWL announced on Monday had been resolved - saying it was confidential, but an adjudicator's decision in favour of Fulton Hogan and Taylor's Contracting upped the cost by $8.3m.

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