The department responsible for the Barnaby-Joyce inspired water buybacks rejected a valuation that valued the water holdings at one-fiftieth of what the government eventually paid for the buyback.
It makes the 10 times valuation paid in the recently exposed Leppington Triangle land scandal, now the subject of a federal police probe, look like a bargain.
The department responsible for overseeing the $80 million water buybacks from Eastern Australia Agriculture (EAA) also failed to obtain a specific valuation of the water licences, according to documents obtained under Freedom of Information.
Eastern Australia Agriculture (EAA) was established by Energy Minister Angus Taylor. Taylor has consistently stated his involvement with the company ceased before he entered parliament.
Furthermore, EAA had self-valued its entire water holdings (some 67,000 ML) at $79.5 million, yet the government paid $80 million for less than half of that holding (29,000 ML of overland flow entitlement). This self-valuation was contained in EAA’s financial report filed with ASIC on Christmas Eve 2016. The water entitlements the government bought were also considered more unreliable overland flow water.
And if the Australian Government solicitor had read this financial report, the government would have discovered that EAA’s parent company was Eastern Australian Irrigation. EAI was registered in the tax haven of the Cayman Islands.
The department has advised Michael West Media that the Australian Government Solicitor conducted a variety of searches on behalf of the department as part of due diligence, including from ASIC, but this “did not include obtaining or reviewing the self-declared value of water holdings relative to the proposed contract value”.
Barnaby’s Boondoggle: documents reveal $80m price for ‘Watergate’ licences was nearly twice valuation
The department had ample time to access the financial report before finalising negotiations for the July 2017 purchase.
It has been more than three years since the water buybacks were concluded but it is only through Freedom of Information documents that a clearer picture is emerging of what a debacle the process was. Just more evidence of how desperately the Australian public needs a federal integrity commission with teeth, yet the government is insisting on its “feather duster” bill.
According to FoI documents, the Department of Agriculture Water and Environment (DAWE) relied on generic valuations of the water holdings done for another program, the Queensland Healthy Headwaters program. The department also rejected earlier valuations from the Healthy Headwaters that would have valued the water at an astonishing 57 times less than what the government actually paid for it.
The department has confirmed that the primary valuations, undertaken by Colliers International, to justify the water buyback were “originally obtained to inform the price for any overland water flow projects under the Healthy Headwaters program”.
However, FoI documents show that just weeks before commissioning Colliers to undertake that valuation, the department had rejected valuations by Opteon that would have valued EAA’s overland flow water entitlements at a mere $1.4 million.
Colliers revalued the water entitlements at approximately $45 million. Despite this, the government still managed to pay $80 million – 57 times more than Opteon’s valuation for the same type of water in the same region.
In its briefing to Minister Joyce, the department claimed the premium price paid was “within the range of independent advice and represents value for money at the seller’s nominated price”.
How did this come to pass? In June 2016, the department commissioned Opteon to provide six water entitlement valuations for various Queensland regions as part of its Healthy Headwaters program. The valuations were usually presented as a dollar per megalitre figure ($/ML).
In early August Opteon valued the Condamine Balonne overland flow water, the region that corresponds to the water entitlements held by EAA, at $50/ML. That figure would have valued EAA’s 28,740 ML overland flow water entitlements at a minuscule $1.4 million.
Almost immediately the department queried two of the six valuations – the Condamine Balonne overland flow water entitlements and Warrego unsupplemented water entitlements – the very same areas where the government eventually pursued its Queensland water buyback process.
Opteon’s valuations were rejected because of a large discrepancy between those valuations and earlier valuations submitted by Colliers International in April 2016. Colliers’ earlier estimate valued the overland flow water in the Condamine Balonne region at a significantly higher $1,650/ML.
Colliers delivered the new valuations in late September 2016.
Because the department didn’t finalise the buybacks in time, Colliers was asked in March 2017 to update its valuation. As the FoI documents reveal, Colliers settled on a rate $1,500/ML for the overland flow water, valuing EAA’s overland flow entitlements at $45 million.
Whether you take the Opteon valuation, the Colliers valuation, or EAA’s own fair value price lodged with ASIC, the government was well and truly outwitted, paying anywhere from double to 57 times more than the estimated value of the overland water entitlements.
In all the material the department tendered to Senate estimates, Senate orders for publication, and other FoI requests, MWM has not found any reference to Opteon’s valuations in any briefing to then Minister Barnaby Joyce.
The briefings only ever contained a recommended maximum purchase price.
The department in responding to a question on notice by Senator Rex Patrick stated the purchase price was above “standard market value range, but below the maximum price the independent valuer advised” should be paid.
What did the ANAO say?
The Australian National Audit Office in July this year tabled a report into the purchase of strategic water entitlements.
The report noted that the arrangements to support the strategic purchases of water through limited tender “were not fully effective”; that the department did not consistently apply approved policy, planning and guidance to the assessment of all limited tender procurements; and that the department did not develop a framework to maximise value for money.
Guess who’s coming to dinner? Glencore, Peabody and BHP