Facilitating the sale of water entitlements from Rookwood Weir

The Issue

The Rookwood Weir is the most recent major piece of bulk water supply infrastructure constructed in Australia. The weir has an annual supply yield of 86,000 ML of Medium Priority-equivalent entitlements, the majority of which is available for agricultural use in the Lower Fitzroy.

While being underpinned by several demand drivers (urban water security for Livingstone Shire Council, water security for industrial users in Gladstone, agricultural production in the Lower Fitzroy) the business case process provided minimal certainty in terms of the strength of agricultural water demand.

Hence, in preparation for the commissioning of the storage and subsequent sale of water entitlements, Sunwater sought to develop material to provide potential agricultural customers – landholders and agribusinesses – with information regarding the potential value of water entitlements for agricultural use in the Lower Fitzroy.

This required the development of materials targeting both significant commercial enterprises with national irrigated cropping portfolios and landholders within the supply area for Rookwood Weir (noting that a certain volume of entitlements were reserved for local landholders).

This required consideration of the fact that most agricultural producers in the region are cattle farmers who are relatively inexperienced when it comes to managing irrigation and have a limited understanding of the potential benefits from transitioning to intensive irrigated cropping.

The Solution

Synergies assisted Sunwater in its preparation for the first round of the tender process by preparing material for the Investment Memorandum that was released to promote interest in the sale process. Synergies’ input included developing material on the underlying economic advantages of the Lower Fitzroy as an irrigated cropping centre and market assessments of several key crops identified as highly prospective in the region, including macadamias, citrus, and table grapes. Synergies was then involved in developing criteria for the assessment of round one tender responses and in undertaking the assessments of the applications.

Following the completion of the round one tender process, Sunwater launched a landholder support and grants program in collaboration with Advance Rockhampton. The objective of the program was to provide information and advice to assist Lower Fitzroy landholders in their decision-making process in terms of whether to participate in the tender process.

A core component of the landholder support activities involved Synergies developing a robust but intuitive financial analysis tool to enable landholders to assess the potential financial viability of the development of irrigated agricultural enterprises using water entitlements from Rookwood Weir. The key features of the tool include:

• Functionality for landholders to develop farm-level models for several suitable horticulture and broadacre crops, including macadamias, citrus, and cotton
• Default parameter values based on Synergies’ experience and consultations with growers, alongside capacity to customise and alter with alternative user inputs
• Built-in calculations for up-front costs, annual growing costs and annual revenue, to model cashflow results over a 40-year period and return overall summary information including payback period, rate of return, maximum net annual return per hectare, whole farm net present value (NPV), NPV per hectare, and NPV per megalitre (ML).

In addition to developing the tool, Synergies presented at three workshops in the Lower Fitzroy region and consulted with growers extensively regarding the usefulness of the tool. The tool was also subsequently used by agricultural consultants engaged by Sunwater to provide further, more site-specific advice to interested landholders.

The Benefits

Sunwater’s two-stage process for the sale of water entitlements from Rookwood Weir has been a resounding success with the asset fully committed prior to commissioning. This included the sale of approximately 36,000 ML of MP entitlements for agricultural water use, predominantly perennial horticulture, in the Lower Fitzroy. This will ensure the weir facilitates the transition of high-value agricultural land in the Lower Fitzroy to intensive irrigated cropping, contributing to the future growth of the value of Queensland’s agricultural production and exports and sustainable economic and employment growth in the regional economy.

Contact

To find out more about this project and how Synergies can assist you, send an email to: contactus@synergies.com.au