Sunday, August 14, 2022

Irrigation company KDIC in receivership

Neal Wallace
The Kurow-Duntroon Irrigation Company owes nearly $39m to two secured creditors, $35.6m to Crown Irrigation Investments Ltd and $3.1m to the Waitaki District Council, and $12.2m to trade and other creditors.

A dispute with a contractor has pushed a North Otago irrigation company into receivership owing more than $50 million.

The Kurow-Duntroon Irrigation Company (KDIC) owes nearly $39m to two secured creditors, $35.6m to Crown Irrigation Investments Ltd and $3.1m to the Waitaki District Council, and $12.2m to trade and other creditors.

Receivers, BDO, are investigating claims from other security holders. The receiver’s report states the company was formed by 70 shareholders in the Waitaki Valley in May 1989 and owns and operates the Kurow-Duntroon Irrigation scheme supplying water to 4090ha but with capacity to supply a further 5500ha.

It sources water from Lake Waitaki and distributes it to shareholders from the Waitaki Dam and Duntroon.

The report states that in November 2018 KDIC entered a contract with Monadelphous Engineering NZ (MENZ) for a $43m upgrading and extension, which included piping the scheme’s water system. This followed direction from Environment Canterbury that the company had to reduce water losses from scheme canals that it had been using to transfer water. Construction began the following February, but delays soon disrupted work. Access to the dam was not finalised until August that year resulting in an extension of time claim from MENZ which cost the company $453,000.

That same month the Waitaki District Council issued an abatement notice against KDIC for work it says did not meet consent conditions. Agreement was reached with the council which required remediation and a further extension of time claim. The parties could not agree on an amount and last November MENZ initiated adjudication proceedings.

In April the adjudicator determined KDIC is liable for $12.9m plus interest. When it was unpaid in mid-May MENZ initiated court proceedings. KDIC directors considered the determinations incorrect and in tandem initiated further arbitration and engaged discussion with its lenders. This led to the decision of directors in May to seek voluntary administration through BDO, an insolvency process that places a moratorium on creditors and at the end of the process creditors vote on the company’s future. The receiver says the dispute with MENZ has made KDIC insolvent.

“Our review of the company’s financial position indicated that prior to the adjudication determinations being received, the company was solvent and had sufficient working capital to meet its ordinary obligations as they fell due. 

“However, upon receipt of the adjudication determinations, the company lacked sufficient resources to settle the sums due to MENZ and was therefore insolvent.”

The scheme is still operating but BDO notes that community-owned irrigation schemes are owned by those who benefit, leaving receivers few options.

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