Water policy partly to blame for Murray Irrigation loss
Water policies like the Murray Darling Basin Plan and water sharing rules which restrict irrigation allocations to the local area are partly to blame for significant financial losses at Murray Irrigation Limited in the 2017/2018 year.
At its AGM on Thursday night, the company revealed it finished the 12 months with a $6.3 million deficit in its earnings before interest and tax (EBIT).
It was significantly higher than last year’s EBIT deficit of $2.4 million.
Its net loss before tax and Private Irrigation Infrastructure Operators Program revenue was almost $5.2 million.
The precast concrete side of the business, MILCast, finished the year with a net profit of $5.1 million, which MIL CEO Michael Renehan said was a turnaround from last year’s MILCast loss, because of a 57 per cent increase in sales.
MIL chairman Phil Snowden said due to the results presented at the meeting, the underlying theme was the financial sustainability of the company and its shareholders.
One of the key messages out of the meeting was that Murray Irrigation would continue to contribute to the economic prosperity of the region by establishing its delivery footprint as a premier agricultural investment location not constrained by the Barmah Choke.
‘‘The board’s major objective is to work with regional stakeholders in mitigating the negative impacts of water reform and retaining existing water in the region,’’ Mr Snowden said.
‘‘Contributing factors (to the EBIT loss) are numerous and they are not limited to a reduction of about a third of the water entitlements in our area through the basin plan, a reduction in water entitlements but virtually no reduction in the area of our operations and the costs of servicing it, a reduction in earnings from reserves/investments reflecting the nationwide low interest rates and the absence of a canal agreement during that year.
‘‘It is worth noting that the five per cent efficiency allocation to shareholders in September was worth about $20 million and that an allocation last year had a value of $9.7 million (2017 it was $2.4 million; 2016 was $13.6 million and 2015 $2.6 million).
‘‘Improved protocols for the maintenance of the system will help to achieve a break even EBIT.
‘‘The board will consider many options to address EBIT and we will be sharing our vision and seeking feedback from meetings planned with shareholders in February.
‘‘We are particularly mindful of the very difficult circumstances our customers are in this season.’’
In his chairman’s report, Mr Snowden said many external factors interfered with the new board’s resolve to concentrate solely on the company following a tumultuous time, but said climate, drought, the price of water, water reform and the Basin Plan, ‘‘and the politicisation of it’’, also demanded attention in the last financial year.
‘‘The bottom line is that about one-third of the water entitlements have left the company’s service area.
‘‘The company earlier partnered with several local entities in funding the preparation of independent research that indicated, in an average season, a $120 million loss in regional production, a loss of rice production of about 30 per cent and a reduction in dairy of one fifth.
‘‘About eight months later, the MDBA claimed that since 2001 in our region, only seven per cent of the 37 per cent decline in agricultural employment was due to the Basin Plan.
‘‘Regardless of the accuracy, or not, of those figures, that is a massive hit to regional prosperity.’’
Mr Snowden said the board was already exploring a range of options to reward and encourage water use in the Murray Irrigation footprint, which would be canvassed and presented at the shareholder meetings next year.
‘‘This company exists to deliver water long-term and cost effectively,’’ he said.
‘‘We want to increase the utilisation of Murray Irrigation assets to an optimum point where usage is balanced against the capacity of the Mulwala Canal.
‘‘We also want to drive company policies that share the benefits and we will be looking closely at the most equitable basis to distribute water savings and dividends.
‘‘In addition to these commitments, we will work with river operators and environmental water holders to maximise the efficiency of the entire Murray system.
‘‘Murray Irrigation also has its own longterm strategic agenda to be an authoritative voice in the sector and will work collaboratively with governments for the benefit of all.’’