The Government has given Westland Milk Products a $9.9 million loan to help build a plant to separately process multiple types of special quality milks into high value products.

The terms of the interest-bearing loan have not been revealed, with Regional Economic Development Minister Shane Jones declaring them confidential.

All up, the plant being built at the West Coast-based co-operative headquarters in Hokitika will cost $22m.

"With suppliers from Karamea to the glaciers and 430 employees in Hokitika, an investment in New Zealand-owned Westland Milk Products is an investment in the economy of the whole West Coast," Jones said.

READ MORE:

* Southern Pastures moves from Fonterra to be Westland Milk's largest shareholder

* Westland Milk Products in black after two tough seasons

SUPPLIED Westland Milk's chief executive Toni Brendish says the loan will allow the co-op to make higher value products.

Westland chief executive Toni Brendish said segregated production of speciality milks is a key component of Westland's five-year strategy.

"Westland needs to reduce its dependency on bulk dairy commodities with their volatile pricing cycles. We'll do this by expanding our capacity to produce high value products, differentiated by the special qualities of the milk used to make them.

"This will include A2 milk and our new Ten Star premium standard milk. There is also potential, in later stages of the project, for other segregated products such as grass-fed, pure Jersey, goat or sheep milk, or even plant-based nutrition," Brendish said.

National's Primary Industries spokesman Nathan Guy queried the loan.

"It's alarming that Shane Jones's Provincial Growth Fund has now become a bank. This loan sets a dangerous precedent - there are plenty of NZ dairy companies who fend for themselves without soft government loans."

As minister in recent years Guy oversaw the Primary Growth Partnership scheme. One of the projects it assisted was to develop the technology that allows Fonterra to make mozzarella in a day.

An MPI spokesman said the amount of taxpayer spending on the project was commercially sensitive, but the funds were not used to build the $260m factory.

The total spend on the PGP dairy programme - which included a dozen other projects - was $162.7m, to which the taxpayer contributed $81.7m over seven years.

However Guy said PGPs were a targeted innovation and value-add partnership fund which had strict criteria, coupled with public reporting and a 50:50 government/private split. The Provincial Growth Fund reporting was "woolly", he said.