Southern Basin water tender: irrigators locked in as corporates gear up

Federal water tender documents show irrigators’ offer to sell are locked in, as corporates are urged to offer parcels of 20GL or more.

As water prices rise in the wake of federal buyouts, some corporate water holders could cash out a percentage of their holdings and end up in a net neutral position.

Southern Murray Darling Basin irrigators selling water to the Albanese Government, under its 70 gigalitre Restoring our Rivers tender, will have to lock in the price they offer for 12 months.

Water brokers say the lock-in clause will lead to irrigators seeking a premium to offset any rise in the market, as the government also seeks expressions of interest from corporate water holders for parcels of at least 20GL each.

Corporate water holders offer the federal government quick access to large parcels of water as Water Minister Tanya Plibersek chases down an extra 450GL, on top of the 2129GL already recovered towards boosting the basin’s environmental flows.

Argyle Capital manages about 250GL of water entitlements, Duxton Water 90.5GL and the AWARE Water Group another 40GL.

The government is due to call for expressions of interest from these and other large water holders in August-September, just as offers under the 70GL tender close.

National Irrigators’ Council chair Jeremy Morton said the buyout would shrink the market and push up entitlement values.

“With less water available prices are only going to go up,” Mr Morton said. “They (large corporate water holders) could cash out a percentage of their holdings and end up in a net neutral position.”

Australian Water Brokers Association vice president Craig Feuerherdt said the Commonwealth buyout was probably the only time the large water holders could sell without depressing the market.

“(But) it doesn’t matter where it’s coming from, it will affect every irrigation community,” Mr Feuerherdt said.

As for irrigators wanting to sell under the 70GL tender, he said most would want to factor a price premium into their offers, given the tender documents prohibit them accepting any other offers for 12 months, unless the government agrees to their withdrawal.

The government’s Approach to Market documents state “tender responses will remain open for acceptance by the department for a period of 12 months after the closing time (September 11), and that period may be extended in accordance with clause 3.10 of this ATM”.

But anyone wanting to withdraw their offer to sell under clause 3.10, can only do so with government approval.

Mr Morton said “at the end of the day irrigators will be balancing how they are to make a sale versus the risk of the market shifting”.