New questions raised over calculations behind $80m water buyback | Australia news


New questions have arisen over the calculations of the volume of water bought by the federal government for $80m from Eastern Australia Agriculture as the department of agriculture and water used data which ended in 1995 and failed to take account of climate change.

Overland flows, the type of water purchased by the commonwealth, are notoriously unreliable. They are essentially flood water and in this region the volume can vary as much as 900% from year to year.

So water valuers use long-term averages to calculate the expected volumes of overland flows.

Documents produced to the Senate and given to Guardian Australia under freedom of information laws show that the department relied heavily on figures produced by the company and which used a long-term average based on historical data from 1922 to 1995.

The company figures were produced by a consultant employed by EAA, Tony Reid, a former director of EAA who also happens to be a long-term business partner of the energy minister, Angus Taylor. The two were both involved in EAA before Taylor entered parliament in 2013 and continue to have common interests in several agricultural businesses.

Reid has told the Guardian he undertook this work for EAA on his own behalf and not through the consultancy he owns with Taylor.

Reid’s methodology produced an average figure of 14,190 megalitres for the Kia Ora property, which at $2,775 a megalitre gave a price of $38m.

But an independent assessment of the purchase by NCEconomics, commissioned by the department and also released to the Senate, compares the 14,190ML figure for 1922-1995 to a long-term average yield of 12,983ML between 1985 and 2009.

If the department had used these figures instead, the amount of water purchased would be reduced by 1,207ML or 8.5%. The purchase would have been $3,313,215 cheaper.

The department also did not take account of the CSIRO’s modelling on the impacts of climate change on expected overland flows in the Condamine-Balonne Region.

A 2008 report by the CSIRO noted the region, in the headwaters of the Murray-Darling, produces 8.5% of the flows into the system.

“The best estimate of climate change by 2030 would reduce surface water availability by 8% and decrease surface water diversion [that’s water harvested by irrigators] within the region by 4%.”

The latest questions about the sale come as Labor said it would support a commission of inquiry into the EAA sale and the former agriculture minister Barnaby Joyce’s handling of it, if it wins government.

The Queensland minister for water, Anthony Lynham, also strongly denied his government had backed EAA’s sale of overland flows, as Joyce claimed.

“What we had supported in 2015 was completely different,” he said. Queensland proposed the Commonwealth buy both of EAA’s farms and all its water, including river water rights, he said.

A desktop review had put the price at $123m, and would have yielded 57,000ML of water including more secure water rights, he said.

Instead Joyce proceeded to buy half the volume of a less reliable type of water entitlement for $80m.

Meanwhile the Guardian has learned that the energy minister, Angus Taylor, was listed in the annual report of the Australian company as a director of the Caymans parent, Eastern Australia Irrigation, at least until some time in the 2012-13 financial year. He was also a director of a second Caymans company, Agricultural Managers Ltd, which served as the management company for the fund.

Agricultural Managers Ltd, which is separate from Eastern Australian Agriculture and Eastern Australian Irrigation, provided management services to the complex investment structure that included several overseas investors.

Graphic showing corporate structure

Usually management companies in these sort of securitised structures undertake the financing, advise on tax, prepare documentation and send investors payments. For that they are paid a management fee and in some cases a fee based on the performance of the fund. This can occur during the life of the fund or when it was wound up.

Through a spokesman, Taylor refused to answer questions on the record about what Agricultural Managers Ltd did and how it was remunerated.

Instead he referred to his earlier statement that he said covered AML. He said he “has never had a direct or indirect financial interest in EAA or any associated company”, that he concluded all association with EAA and related companies prior to entering the parliament in March 2013 and had no knowledge of the buyback until it occurred. He also says he received no benefit from the transaction.

It appears that Taylor resigned as a director of both Caymans companies prior to entering parliament and for this reason had no need to declare it on his pecuniary interests register. The requirement for disclosure is not retrospective.

Company records show he resigned from a similarly named Australian company Agriculture Managers (Australia) Pty Ltd in October 2012.

Who took over the management company remains a mystery as the Caymans does not release records of directors or shareholders.



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