A $100 million milk-processing factory planned near Gore should be operating for the 2012-13 dairy season, but a shortage of local equity could force it to look overseas for financial backing.
If that happens, five of the country's nine operating or proposed dairy processing plants will be foreign-owned or have significant foreign ownership.
Mataura Valley Milk director Ian Tulloch was optimistic the dairy factory planned for McNab, north of Gore, would be operating by the 2012-13 season, given the level of interest from offshore investors.
The company is seeking a cornerstone partner to contribute 50% to 60% of the required funds, but the key was to find a compatible partner.
"We are still looking for compatible partners. We have had encouraging discussions in the last month," he said yesterday.
The proposed plant has resource consent. But, increasingly companies are looking overseas for funding.
In July, China-based Bright Dairy paid $82 million for a 51% stake in Canterbury's privately owned Synlait Milk, and this week Vietnam Dairy Products bought a 19.3% share in Miraka Ltd, which is building a $121 million processing plant near Taupo.
Miraka is owned by Maori dairy farmers Wairarapa Moana Incorporation and Tuaropaki Ltd which together run 10,000 dairy cows, but will also source milk for the plant from the Central North Island.
Open Country Dairy has Singapore's Olam International as its second largest shareholder while Nutritek Overseas, also from Singapore but with links to Russia, recently took over New Zealand Dairies based at Studholme in South Canterbury.
There have been reports Nutritek wants to sell its plant and that New Zealand-owned Oceania Dairy Group, which has resource consent to build a factory in nearby Glenavy, was investigating buying the plant.
No decision has been made.
Oceania is locally owned and earlier this year had agreement in principle from Maui Capital for debt and equity to build at Glenavy.
New Zealand Venture Capital Association chairman Kerry McIntosh said foreign investors could offer more than cash, such as distribution channels, branding and technical expertise.
He said there was venture capital and private equity available, but the conditions required for investing, such as investment term and liquidity intentions, may not suit those looking for investment.
"There can be a mismatch between private equity and venture capital fund requirements, such as risk return, liquidation event and what investors are looking for."
Fonterra still processes about 90% of New Zealand milk, but its market share has declined from about 96% when it was established in 2001, even though the volume of milk is growing.
A company spokesman said it was ironic the New Zealand farmer-owned co-operative was required by law to supply milk to foreign-owned companies which they processed and marketed in competition to Fonterra.
This year, Fonterra is required to supply 583 million litres of milk to 25 various companies, for which it receives the current milk price plus 10c a litre.
New Zealand's total milk production is more than 16 billion litres a year.
Foreign interest in New Zealand's dairy industry is wider than just processing, with Chinese-owned Natural Dairies seeking to buy the Crafar farms in the North Island which is in receivership, and Olam seeking to buy a majority stake in publicly listed New Zealand Farming Systems Uruguay.
There is interest in who will buy South Canterbury Finance's 33% share in Dairy Holdings from the finance company's receivers.
Who owns what
Fonterra: 100% farmer-owned co-operative.
Tatua Co-operative Dairy Company, Morrinsville: 100% farmer-owned co-operative.
Westland Milk Products, Hokitika: 100% farmer-owned co-operative.
Open Country Dairy, plants in Waikato, Wanganui and Southland: Olam International Singapore, is second largest shareholder.
New Zealand Dairies, Studholme: Owned by Nutritek Overseas, Singapore and Neliec Holdings, Cyprus.
Synlait Milk, Dunsandel: Application for 51% stake to be sold to Bright Dairy, China.
Proposed plants
Oceania Dairy Group, Glenavy: New Zealand-owned but still looking for capital.
Miraka Ltd, Taupo: Vietnam Dairy Products is to buy 19.3%.
Mataura Valley Milk, Gore: Looking for cornerstone shareholder.
