Murray Irrigation says built on current capital reserves, the fund will grow through the annual sale of company water, Asset Maintenance and Renewal Reserve (AMRR) fees, further efficiencies, and income generated through investments.
The contribution from the sale of company water will be around $54 million over the five-year period, or an average of $10.8 million annually.
Currently, the business says it generates an average $6-to-$7 million from annual temporary water sales.
Murray Irrigation chair Noel Baxter said this plan was the first step in the establishment of a fund that would provide a foundation from which the business could lower the risk of equipment failure, enhance the security of future water delivery and keep fees as low as possible for future generations.
He said it involved a reset to the management of company water and followed a generational review of the business, which found Murray Irrigation had been operating at a significant deficit for many years.
The review identified a need to build capital reserves in order to invest in the infrastructure and technology necessary to continue to deliver water in a changing environment.
While the modelling identified a need for a $400 million investment fund, Mr Baxter said the board believed the priority is to begin the journey of rectifying the company’s capital structure, which will allow for modifications along the way to reflect changing circumstances over time.
“We have investigated many scenarios to reset Murray Irrigation’s revenue model,” Mr Baxter said.
“We know where the fund needs to be, but we also recognise that shareholders must understand and support the plan for how we are going to get there.”
The fund size, rate of growth and parameters will be reviewed at five-year intervals.
Murray Irrigation will continue to explore potential benefits that could stem from any new or enhanced agreements with departments such as the Murray-Darling Basin Authority and the Commonwealth Environmental Water Office.
As further opportunities arise, any additional gains from these arrangements could increase the volume of water available within WaterWell.
“As we know, the water management environment continues to evolve and, as an organisation, we want to ensure we are in a position to respond to this,” Mr Baxter said.
Murray Irrigation chief executive officer Ron McCalman said in developing a plan for financial sustainability, it had been important to minimise any impact on fees and charges.
“Under this plan, Murray Irrigation’s current fees and prices pool will be maintained, and any increases over the five-year period will only reflect Consumer Price Index rises, plus government pass-through charges,” Mr McCalman said.
The average annual volume of company water sold will increase from July 1, 2024.
Murray Irrigation said the process of selling water was guided by robust regulation to ensure no unfair commercial advantage was provided to any potential purchaser of the water. This includes all parties who may have a commercial interest in water, including shareholder directors, independent directors and staff.
Once the board has set the strategy for the year, management of the annual sale of water will be conducted by a small number of Murray Irrigation staff through a highly confidential process. The usual monitoring and reporting processes will apply.
Murray Irrigation is encouraging customers to attend an information session on September 13 and 14 to understand how this change will be implemented and to discuss what this will mean for their business.
- Deniliquin: Wednesday, September 13 at 4pm, Deniliquin RSL.
- Finley: Thursday, September 14 at 8am, Finley RSC.
- Wakool: Thursday, September 14 at 4pm, Wakool Services Club.
