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PSP Investments, a Canadian pension fund, could now be the largest owner of water in the Murray-Darling Basin

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Category: Water

Created: Tuesday, 18 February 2020 23:14

Written by Clint Jasper - ABC Rural

PSP Investments will hold just over 2 per cent of available water entitlements in the Murray-Darling Basin.

A Canadian Government-owned pension fund could become one of the largest private owners of water entitlements in the Murray-Darling Basin from today, owning roughly 2 per cent of all its available water rights.

Canada's Public Sector Pension Investment Board (PSP Investments) is the pension fund for the country's armed forces, public servants, police and firefighters.

It has been on a multi-billion-dollar buying spree in Australia recently, spending a record amount for a WA dryland cropping operation and water rights in the lower Murray.

Now, through its wholly-owned subsidiaries PSP Bidco and Sooke Investments, it is the owner of Webster Limited, Australia's fourth-oldest company.

The soon-to-be deregistered ASX-listed Webster Limited was already a significant owner of water entitlements, reporting 167,217 megalitres — one megalitre (ML) is 1 million litres — in its portfolio at September last year.

PSP's previous investments in Australian agriculture means that now the deal is complete, the Canadian pension fund holds more than 200,000ML of water in the Murray-Darling Basin.

It will use this water to grow walnuts, almonds, cotton, and cereal crops, and is unlikely to 'speculate' on water because last year, despite the volume of water Webster owned, it still did not have enough for permanent crops and had to buy water on the expensive spot market.

Adding it up

A breakdown of Webster's water portfolio provided to investors last year shows high security, general security, and supplementary water rights in the southern Murray-Darling Basin — the Murray and Murrumbidgee Rivers — totalling 133,790ML.

But 81,288ML of water entitlements from those systems will be transferred to KoobaCo, which PSP will only have 49.9 per cent control of, while former Webster chairman Chris Corrigan and director David Fitzsimons will own the remaining stake.

A joint venture between PSP and the Robinson family holdings in the northern Basin, Bengerang, gives it control of around 20,000ML of water there, according to Marsden Jacobs Associates principal Simo Tervonen.

Add the 89,085ML of lower Murray entitlements PSP purchased from Singaporean-based Olam at the end of last year and the total amount of water in the southern Basin owned by PSP grows to about 202,231ML.

This year, with general security licences in NSW at zero per cent, Webster told shareholders it had to enter the temporary market to buy enough water to keep its permanent plantations of walnut and almond trees watered.

How much water is that?

According to Mr Tervonen, there were approximately 14,800 gigalitres (GL) — or 14.8 million megalitres — of surface water entitlements on issue across all catchments and entitlement classes in the Murray-Darling Basin.

Commonwealth and state governments, the largest owners of water in the Basin, hold 21 per cent of surface water entitlements for environmental purposes, leaving 11,700GL for other water licence holders.

Analysis by Marson Jacobs Associates suggested that once groundwater entitlements and conveyance water were removed from the equation, the pool of water available for irrigators was approximately 8,880GL, or 8.88 million megalitres.

"Let's say a party owns 200,000ML of that pool — that would represent 1.7 per cent of all the consumptive pool," Mr Tervonen said.

Municipal water corporations, as well as irrigation infrastructure operators, are also among the largest holders of water entitlements.

Properties like Cubbie Station have significant water licences, but Mr Tervonen said because they were unsupplemented or overland flow licences, they were very different to licences in other states.

"So basically, on comparable terms, Cubbie's holdings are only 93,000ML," he said.

"The ATO foreign ownership register is also based on the nominal volume of the entitlement, not entitlement characteristics such as the volumetric limit."

Outside the Basin, mining companies like Chichester Metals own around 450GL of water entitlements, and Pilbara Iron owns more then 210GL.

Foreign-owned water

Last year, the Federal Government released the first Register of Foreign Ownership of Water Entitlements revealing that across the country — including all industries, in all states and territories — about 10 per cent of Australia's water entitlements were foreign owned.

 

The figure in the Murray-Darling Basin was 9.4 per cent and includes groundwater entitlements, with 21.9 per cent of the northern Basin entitlements foreign owned and 5.5 per cent of southern Basin entitlements held by foreign interests.

Non-resident individuals, foreign companies, state-owned enterprises, and any company in which a foreign entity owns 20 per cent or more are considered to be 'foreign' under Australian law.

China holds top place with 732GL, with the US (720GL) and the UK (411GL) holding second and third place.

Canada was fourth with 212GL, but PSP's recent acquisitions could nearly double Canada's stake in Australian water entitlements.

The ABC spoke with two other people connected to Murray-Darling Basin water markets, and each agreed the ownership of a further 202GL would make the owner one of, if not the largest owner of water in the Basin.

Water ownership debate

Tensions over water ownership and trading have been running high, especially in the southern Basin, this summer.

NSW state Shooters Fishers Farmers MP Helen Dalton has been lobbying hard to introduce laws that would force corporate water owners and any politician who owns water entitlements to publicly declare what they own.

Ms Dalton has declared she owns 1,383ML of high-security water and 3,324 ML of general security water in the Murrumbidgee valley.

Following an 11,000-signature-strong petition submitted to the NSW parliament by Ms Dalton, state politicians will debate the merit of establishing a national water ownership register on February 27.

Former water minister David Littleproud told ABC Rural recently "I think this water market has evolved into something that has gone far beyond what it was first intended to do".

In information about the PSP deal released to investors and the ASX under the heading "Risks", Webster said its share price was influenced by "reputational risks, particularly in connection with the water industry".

The Australian Competition and Consumer Commission is currently undertaking a review of Australia's water markets.

Webster Limited and PSP Investments were asked to comment on this story, but by the time of publishing neither had responded.