Duxton snaps up $39.1m of wineries’ water: Treasury Estate cuts lease back deal

Duxton Water is raising $44.1m from its shareholders to finance the purchase of 4770 megalitres of Treasury Wine Estates entitlements.

Duxton Water chairman Ed Peter and his team have bought 4770 megalitres of Treasury Wine Estates entitlements, which they will lease back to the winery for $1.4m.

Treasury Wine Estates has sold 4770 megalitres of its water entitlements to Duxton Water Limited for $39.1 million, equating to $8197/ML.

Under the deal TWE will lease back the water from Duxton at 4.5 per cent of its market value.

But TWE retains a call option on the water that allows it to buy back the water from Duxton, if it fails to have signed a binding agreement to sell the vineyards associated with the entitlements by September 30.

In its announcement to the ASX this week, Duxton stated “this transaction includes the ability for TWE to buy the water entitlements back from D20 at market price (subject to price cap and collar) should a binding sale agreement for the associated vineyards not be signed by 30 September 2023, or completed by 14 June 2024, in which case TWE has the ability to cancel the lease”.

“Upon successful sale of the vineyards associated with these water entitlements, the lease may either be assigned to the purchaser or cancelled.”

Duxton is funding the water purchase by raising up to $44.1 million, via a 1:4 partially underwritten pro rata non-renounceable entitlement offer to its existing shareholders, set at $1.50 per share, representing an 11.5 per cent discount on its June 30 share price of $1.695.

New shares under the offer are expected to be issued on August 8.

The deal comes as the World Meteorological Organization predicts the onset of an El Niño, which is set to increase the risk of drought in Australia, driving up water prices.

At the same time the Federal Government has re-entered the water market in a bid to recover shortfalls in water recovery across several Murray Darling Basin catchments, and is under pressure from South Australian senators and the Greens to recover another 450,000ML for the environment.