Meridian dumps West Coast hydro plan

Tuesday 22nd May 2012

Opposition to Meridian Energy's plans for a 100 Megawatt hydro-electric scheme on the undammed Mokihinui River on the South Island's West Coast has forced its abandonment, the state-owned power company has announced.

The $300 million project won resource consents in April 2010, but faced appeals from the Department of Conservation and environmental groups, and the proposal was a key part of the Green Party's campaign to preserve New Zealand's "wild rivers".

The project is the second large-scale renewable energy project that Meridian has dropped since the arrival of former Fletcher Building senior executive Mark Binns as chief executive. Binns announced abandonment of the similarly heavily opposed 633MW Project Hayes wind farm in the Maniototo region of central Otago in January - his first major act as chief executive.

Appeals to the Environment Court against the Mokihinui project had been scheduled to begin in September and were expected to last three months.

The process had the potential to become a political issue as the SOE prepares for partial privatisation. While no timing has been given officially for the sale of up to 49 percent of the largest state-owned power provider, Meridian is widely tipped as likely to follow MightyRiverPower, whose partial float is scheduled for the third quarter of this year.

Unlike Project Hayes, which had become less commercially attractive on top of its resource consent hurdles, the Mokihinui project still had a "strong business case and would have been beneficial to the West Coast," said Binns in a statement. "The decision was difficult and followed a full review of the hydro scheme and the risks and uncertainties the project faced prior to becoming a reality", especially as the project encroached on DoC-administered land.

"Our recent commercial review of the project determined it was not prudent to proceed further given the high costs and the risks of the process involve. It was the difficulty associated with seeing a path through the land issue that was of most concern,” Binns said. “Looking forward, it will be important for industry and stakeholders to work together constructively on how to rule projects in as New Zealand’s energy needs continue to grow over coming decades,” he said.

The decision comes ahead of a report to be released on May 31 by the Parliamentary Commissioner for the Environment titled "Hydroelectricity and wild rivers: climate change versus natural heritage", examining the problem of managing "good things that are sometimes in conflict with each other."

Last month, rival Contact Energy dropped plans indefinitely for up to four new dams on the Clutha River, citing more attractive development options elsewhere, but retains a long term interest in development options on the river.

However, Meridian owns no land in the area, and while Binns told BusinessDesk he would "never say never" on reviving the Mokihinui proposal, the requirement for access to DoC land when the department was a chief appellant against the project made it difficult to envisage gaining permission.

The abandonment increases the chances of two other West Coast hydro projects, being advanced by Solid Energy and Hydro Developments, both of which seek to harness water flowing through Solid Energy's Stock mining area. Binns said Meridian's next most likely development would be at Mill Creek, a 60MW wind development in the Ohariu Valley, west of Wellington and north of its West Wind farm on the Makara coast.

BusinessDesk.co.nz

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