Questions over companies chosen for $200m of Murray-Darling water buybacks | Australia news
Despite questions in the Senate, calls for papers and freedom of information requests, mystery still surrounds the reason the former agriculture minister Barnaby Joyce chose the companies he did for almost $200m of water buybacks in 2017.
The buybacks of water using funds allocated for purchasing environmental water under the Murray-Darling Basin plan have been controversial because they proceeded without open tender and, once announced, were criticised because of the reliability of the water purchased.
One was for $80m for water from a property called Tandou, south of Menindee. Tandou was owned by Webster Ltd, a company controlled by the businessman Chris Corrigan.
Documents uncovered by the Senate reveal that the NSW Office of Water, then headed by Gavin Hanlon, played a crucial role in pushing for that deal to go ahead.
New South Wales was keen for the federal government to buy Tandou’s water because it helped clear the way for the Menindee Lakes project, which would allow NSW to reach its target for environmental water without having to buy any from irrigators.
Instead it would reach the savings by shrinking the lakes and reducing evaporation. But to do that it had to eliminate the need to provide water to Tandou, south of the lakes.
The Guardian has spent several months looking into the sale, and why the government chose to buy EAA’s water for $79m when it had rejected it twice before. No clear answers have emerged, other than that EAA was a willing seller and its investors were keen to realise their investment.
Asic records show that the company was established in 2007 when the water trading market was being set up, making water rights potentially very valuable.
The reforms allowed water rights to be traded separate to land, and provided a way for the government to buy back water for the environment.
In 2008 EAA bought two properties, Kia Ora and Clyde, just south of Cubbie Station, in the St George/Dirranbandi region of Queensland. Both had extensive water rights.
EAA’s ultimate holding company between 2008 until the time of the water sale was Eastern Australia Irrigation, which is domiciled in the Cayman Islands.
Its shareholders were reported to be a number of major investment funds based in Hong Kong and the UK. The early directors of EAA included Angus Taylor, who is now the energy minister, but who was at that time was an investment banker specialising in agriculture investments.
He has described himself as a co-founder of Eastern Agriculture in his parliamentary biography. Asic records show he was a director from mid 2008 to late 2009.
Another consultant, Tony Reid, followed Taylor onto the board of EAA. Reid, who had worked at the same firm as Taylor, McKinseys, spent a year on the board.
Documents obtained under a freedom of information request by the Guardian show that Reid, though no longer a director of EAA, played a significant role in the most recent water buyback in 2017.
Reid acted as a consultant and was central to determining how much water was available to be sold by EAA in 2017.
There is no suggestion Taylor or Reid improperly influenced the purchase.
The documents show Reid was engaged to establish the volume of water EAA was selling – no simple feat when it comes to irregular overland flows – and to calculate its value.
He was regularly copied in on negotiations between the chief executive of EAA, Matthew Bickford-Smith, and the department, and was responsible for dealing with Queensland water officials over the water volumes.
“My role for EAA in the water sale was to perform that analysis and correspond with the Queensland Department of Natural Resources on the analysis. Like everything I do, it is all scientifically based on the best known factual evidence,” he told the Guardian.
Despite rejecting EAA’s overtures to sell twice before, the department seems to have changed its mind. Documents produced to the Senate show that the department approached EAA some time before 9 February 2016 to ask if the company was now interested in selling its water.
“Thank you for your communications regarding whether Eastern Australian Agriculture might be interested in offering some of its water entitlements for sale,” Bickford-Smith wrote on that date.
The bureaucrat responsible for the buyback program, Mary Colreavy, told the Senate in October last year she did not “cold call” executives to see if they wanted to sell their water.
“These were unsolicited offers to us. We receive offers from people saying they have water and would be interested in talking to us about it,” she told the Senate.
But Colreavy also said there were “a couple of occasions” where she had talked to large corporate water holders. “They had tried to sell water to us unsuccessfully and we went back to them to say, you’ve approached us a number of times in the past and would you like to talk further.”
Reid said he had worked directly for EAA in various roles since 2010 and the consultancy he did for EAA to sell its water was independent of his involvement in Growth Farms, the agricultural management company in which both he and the Taylor family have interests.
“I was compensated exclusively and personally for my work with EAA. Growth Farms or any other entity received no compensation,” he said.
The deal was a good one for EAA.
One shareholder, the UK-based EF Realisation Fund, told the London stock exchange that EAA “was able to negotiate a price for the water entitlements to the highest level ever paid and in August 2017 it completed the largest ever sale of water entitlements in the Murray-Darling basin”.
EAA’s accounts show it booked a $52m gain on the value of its water rights immediately after the government bought its water.
As well as the price paid and the valuation process, there have been questions about the reliability of the water sold by EAA – the purchase was for overland flows, which are only available during floods.
Overland flows spread across the floodplain after upstream floods. Properties on the floodplains harvest it by building levies to direct it into huge storages for growing irrigated crops such as wheat and cotton.
Because the flows are attached to land, the Australia Institute argues, overland flow licences should not be treated as equivalent to river flows when meeting the basin plan’s water recovery target. It says the commonwealth has paid $2,700 a megalitre, with no guarantee that the water will reach the Ramsar-listed Narran Lakes downstream.
Following the water sale, the two properties were sold to new owners and the original investors were paid out.