Alterra has completed the feasibility study for its planned 300ha avocado project located in Pemberton, Western Australia.
The study sought to test the viability of the proposed development and identify critical issues that may impact the bankability of the project.
The study confirmed the project could support a viable 300ha avocado orchard based on a number of key assumptions. These assumptions included land assembly and approvals being in place to support the project and the project site being suitable for avocado production subject to the implementation of subsurface drainage.
An independent hydrological study forecasting water catchment out to 2050 found the project self-sufficient in water and able to meet peak water demands of 2.1GL per annum.
It was also assumed the project could be developed over three years, with the study confirming a development funding cost of A$40.6m, a minimum 30-year life of the project and a strong, double-digit internal rate of return.
The 300ha avocado project is housed within a special purpose vehicle, Carpenters Beedelup, with the majority of funding for Carpenters to be sourced from external equity and debt providers, with Alterra retaining a substantial minority interest.
Alterra will provide long-term management services to the project. In addition, it is entitled to performance fees for both operational outcomes and any project sale to third parties.
With the feasibility study now complete, discussions with both equity and debt providers are underway with first external contributions expected in early 2021.
Subject to availability of capital, Alterra plans to proceed with a 2021 planting of up to 50ha of avocados. The balancing 245ha will be planted over two years through to 2023.
To date, Alterra has incurred direct costs of A$1.4m in priming Carpenters, including funding an initial 5ha planting in October 2020 that has yielded crucial research data, including the performance of higher-density planting to optimise the full 300ha planting.
Research is showing that increasing the number of trees per hectare, if successful, could result in a 67 per cent higher yield per annum (up to tree age 6) based on yield performance data provided by French’s Group.
Construction of the 4.1GL dam to support the project is also underway. Originally, this was to be funded by Alterra with construction to start in late 2021 with the project relying on existing dam water on site for irrigation during the initial ramp-up phase.
However, the landowner from whom Alterra leases the Carpenters land has elected to start construction early and to directly fund the build costs.
This is in part due to permitting requirements that dam construction must be substantially commenced by June 2021 and any construction that extends beyond this permit may require a permit extension.
Alterra chief executive Oliver Barnes said the results of the Carpenters study confirmed the opportunity for Alterra to develop a large-scale project in a premium horticultural region.
“In pursuing this opportunity, we are adopting conservative assumptions around yield and market prices. However, we are also applying the best available technologies and horticultural practices to ensure Carpenters has the best chance for outperformance,” noted Barnes.