Water entitlements: Canadian investment funds snap up scarce Australian resource
Victoria’s Goulburn Valley is among large Australian irrigation communities entitled to less Murray Darling Basin water than Canadians.
Canada’s thirst for Murray Darling Basin water entitlements has hit 841,000 megalitres — more than is held by some of Australia’s largest irrigation communities.
About half the Canadian investment funds’ entitlements are held on unregulated river systems in the northern basin, granting them the right to flood-plain harvest even more than their listed entitlements during a wet 2021.
It means that in combination with their southern basin higher security entitlements, three Canadian pension funds and investment firms will have more water under their control in 2021-22 than the 717,400 megalitres that Goulburn Valley’s irrigators can expect to gain on full, 100 per cent, allocations.
The Canadians, like other foreign investors, are flooding into the market on the back of a weakening Australian dollar and talk of underpriced water entitlements.
The Australian Taxation Office has already given foreign investors a leg up, ruling last year they can “disregard any capital gain made from the sale of water allocation rights”, a move NSW MP Helen Dalton said the Federal Government should reverse.
“The Government has rolled out the red carpet for these foreign businesses,” she said.
Paul Thompson, managing director of Select Harvests which is Australia’s largest vertically integrated almond company employing 533 people, said all locals had to pay CGT on water entitlements and speculated that the ATO ruling may have been linked to the finalisation of Olam’s sale of 90,000 megalitres to Canada’s PSP Investments early last year.
“There’s not even FIRB (Foreign Investment Review Board) approval needed for water,” Mr Thompson said.
“(Yet) it’s the most valuable asset in our country. The land is worth nothing without it.”
Speculators Duxton Water have been spruiking the low cost of Australian water to investors.
Duxton chairman Ed Peter told investors at a zoom briefing last month “US and Canadian pension funds have been exceptionally active down here, ‘cause we’re so much cheaper, (and) we believe that will continue”.
He said water entitlements were selling in California for $30,000 a megalitre, compared to just $8000 a megalitre for Australia’s most expensive water.
“What’s fun here is our (southern basin) current plantings … already need 700 gigalitres of water. In the last drought we only had 1100 gigalitres.”
Mr Peter said once these permanent plantings reached maturity they would need 1250 gigalitres, meaning the next time a drought hit “there’s going to be one heck of a fight for the marginal supply of water.
“We’ve got ‘Economics 101’ supply and demand imbalances that are so perfect you couldn’t make a better story (for investors).”
Other companies are promoting massive almond and other permanent plantings, many of which will compete with winegrape, dairy, rice and other summer croppers for water.
Global real estate firm Colliers International recently called for expressions of interest from investors in a 6929ha irrigation development, which combines two properties north of Balranald into what it calls “one of Australia’s largest greenfield development opportunities”.
But the Lower Murrumbidgee Homebush aggregation is being promoted on the back of 108 gigalitres of low-reliability supplementary water, which means any developer faces having to enter the water market to make up shortfalls.
National Irrigators Council chairman Jeremy Morton said Australia was “a bit unusual on the level of foreign investment we allow” and said he hoped these overseas players were paying their share of tax in Australia.
As of June 30 last year Canadian companies topped Australia’s register of foreign water ownership, holding 698 gigalitres of entitlement.
Since then Canada’s state-owned PSP Investments has snapped up another 143,000 megalitres as part of its purchase of the Auscott properties in the Macquarie Valley, Murrumbidgee and Namoi Valleys, bringing the nation’s total Australian holding to 841,000 megalitres.
Other PSP purchases include:
89,085 megalitres of lower Murray entitlements, which it purchased from Singaporean-based Olam.
57,600 megalitres of Gwydir Valley water entitlements in 2019 after the PSP-AFF partnership bought out Midkin cotton at Moree in northern NSW for about $300 million.
153,000 megalitres in February 2020, when PSP bought out Australia’s largest corporate water owner ASX-listed Webster Limited for $854 million
33,517 megalitres when it snapped up the 9593-hectare Bengerang and Darling Farms aggregation in northern NSW for $132.7 million.
EDITORIAL: WATER SO CHEAP IT’S A STEAL
Why are foreign state-owned and private corporations so keen to buy Australian water entitlements?
Duxton Water chairman Ed Peter’s answer is “US and Canadian pension funds have been exceptionally active down here, ‘cause we’re so much cheaper, (and) we believe that will continue”.
The pitch is simple – Australian governments have over-allocated water, permanent plantings of thirsty almonds, walnuts and tablegrapes are booming and next time there’s even the whiff of a drought prices will soar.
As Mr Peter rightly warns, next time a drought hits “there’s going to be one heck of a fight for the marginal supply of water”.
Dairy farmers will be priced out of the market and vast areas of southern NSW and northern Victorian farm land will remain dry.
Communities reliant on rice and other summer crops will lose more families, school kids, businesses and services. Even citrus, dried fruit and wine grape growers will struggle.
Paying a $1000 a megalitre for allocation water in the midst of a drought is not viable for someone suppling the grapes that go into a $5 bottle of Woolworths’ plonk.
Of course there will be those who will pay that sort of money, given their whole balance sheet is reliant on vast spreads of almonds, walnuts or tablegrapes that must be watered.
There is a certain irony in the fact that Canadian investors, who live in one of the wettest nation’s on earth, have learnt buying Australia’s scarcest resource is a sound investment.
The numbers speak for themselves. In June 2018 Canadian investors owned 212,000 megalitres of Australian water entitlements, now that figure is 841,000ML.
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