Murray Irrigation

General Meeting 2024 - Know the facts

Know the facts to make an informed decision

Finance and business review

Claim Fact
In 2038 we will have a fund balance of $160m, a commitment of $397m, and deficit of $237m. This is an insolvency issue The fund balance of $160m is in 2037 and is the balance remaining after deducting all commitments. IE there is no deficit, and no insolvency issue.
We have an Engineering Assumption of a $397m spend predicted in 2038. The Board have approved the sale of temporary water revenue model, which includes modelled capital expenditure of $148m over 15 years, 2024 to 2038. There is no Management Plan, nor Board Approval to spend $397m in 2038, nor to spend the amount over 15 years, 2024 to 2038.
Disastrous business review The business review provided valuable insights to management and the Board into how best to modernised Murray Irrigation. Importantly it provided clarity around the challenge of the shortfall of revenue; that to be a sustainable intergenerational company additional revenue is required. The Board and Management have commenced the journey of addressing the revenue shortfall through fees and charges increases, and through the Board Approved Revenue Model which includes the increased sale of temporary water; without which MIL would continue to draw down on financial reserves.
The previous MIL board …established a $400m future fund. The Board have approved a target fund balance of $400m by 2064 (in 40-years' time), requiring on average $10.8m p.a. of water to be commercialised (this equates to an additional 40GL on top of the historical 40GL Sustainability Product). To put this into perspective, this is a fund size of $142m in today's money. MIL's fixed assets would cost approximately $3.4 billion to replace in 2064 (in today's money $1.2 billion). It is prudent and of utmost importance to build financial reserves to ensure funding is available to adequately maintain these fixed assets, to perform life extension works on them, and to replace assets once they have reached end of service life.
Meanwhile company efficiency water ….was sold to plug an unidentified financial shortfall to the tune of $7 million. There is no unidentified financial shortfall, there is however a revenue shortfall, which is not a new problem. For the past 5-years the Sustainability Product has been required to supplement this revenue shortfall. The Board Approved FY24 Budget includes $6.6m of revenue to be achieved through the Sustainability Product. This is required to supplement the revenue shortfall, and to achieve a breakeven $0.00 net profit for the financial year.
There was discussions and meetings over the sale of part of the company's conveyance license, again with no shareholder consultation. No meetings or discussions have occurred recently about selling conveyance water. MIL had numerous discussions mid last year with Government regarding the sale of MIL’s conveyance water and these were fully disclosed to MIL shareholders in September 2023.
Building the AMRR to $400m by 2038 will require $27m p.a. which will cost growers $70/ML p.a. The Board have approved a target fund balance of $400m by 2064 (in 40-years' time), requiring on average $10.8m p.a. of water to be commercialised (this equates to an additional 40GL on top of the historical 40GL Sustainability Product). To put this into perspective, this is a fund size of $142m in today's money. MIL's fixed assets would cost approximately $3.4 billion to replace in 2064 (in today's money $1.2 billion). It is prudent and of utmost importance to build financial reserves to ensure funding is available to adequately maintain these fixed assets, to perform life extension works on them, and to replace assets once they have reached end of service life.
Landholders will have to pay delivery costs of $100/ML to meet the $40m annual budget - based on 400,000ML usage. The Board Approved FY24 Budget allows for $30.5m of operational expenditure. The FY24 budget was developed with an on-farm delivery forecast of 650GL, which equates to $47 of operational expenditure per ML. However $47/ML is based on on-farm deliveries only, and when DPE Environmental (100GL) and WaterNSW Escapes (100GL) forecast deliveries are included in the calculation, the operational expenditure per ML drops to $36.
We can confirm that around 105,000mL of WaterWell product water has been sold this year to buyers inside MIL footprint to cover poor investment and management decisions. MIL sold 105,000ML of WaterWell water to fill a $7m financial shortfall they haven’t adequately explained. There is no unidentified financial shortfall, there is however a revenue shortfall, which is not a new problem. For the past 5-years the Sustainability Product has been required to supplement this revenue shortfall. The Board Approved FY24 Budget includes $6.6m of revenue to be achieved through the Sustainability Product. This is required to supplement the revenue shortfall, and to achieve a breakeven $0.00 net profit for the financial year.There are no poor investment decisions, the AMRR fund for example achieved an investment return of 10.5% for 2022/23.
The operating budget includes $30.5 million for operational expenses, $12.8 million for capital expenses and a $10.8 million investment fund while productive water usage across the footprint is reducing. The Board approved 2023/24 Budget includes $30.5m for operational expenditure and $10.7m for capital expenditure for the financial year. This budget includes $6.6m of revenue to be generated through the sustainability product; required to supplement the revenue shortfall, to achieve a breakeven $0.00 net profit for the financial year. The Board have approved a target fund balance of $400m by 2064 (in 40-years' time), requiring on average $10.8m p.a. of water to be commercialised, commencing 1 July 2024 (this equates to an additional 40GL on top of the historical 40GL sustainability product). The $12.8m capital expenditure figure stated by SRI is the 50-year average capital expenditure estimate per annum between 2024-2073, modelled during the business modernisation review, required to perform life extension works and replace fixed assets once they have reached end of service life, to allow intergenerational service from assets.
Government only paid around 2.5% of the running cost of the system. Collective revenue from the Escapes agreement and the Environmental agreement totalled $1.84m (excludes Government pass-through charges), and this alone contributed 7% towards the operational expenditure for 2022/23, not the SRI stated 2.5%. In addition these agreements contributed almost 60GL of conveyance water. Without these agreements, customers would not have received resource distribution through Waterwell, but pleasingly were provided a 6% distribution.
Some of the water which would normally be returned to you as a shareholder via Waterwell, through system efficiencies which you paid via PIIOP has been sold, further reducing the ability to offset fixed charges The sale of temporary water strategy is not taking WaterWell away. MIL have delivered both a 3% resource distribution and a 5% water users' credit for the 2023/24 water season. Without the temporary water strategy, Delivery Entitlement Fees would need to increase by $11 per DE.
MIL now has a business model which has stripped away the value of DEs. The sale of temporary water strategy is not taking WaterWell away. MIL have delivered both a 3% resource distribution and a 5% water users' credit for the 2023/24 water season. Without the temporary water strategy, Delivery Entitlement Fees would need to increase by $11 per DE.
In response to the Chairman and CEO of MIL claiming great progress on bringing the budget back into surplus I wish to point out that they have done so by selling off shareholder assets, that being water. MIL has not sold permanent water to bring the budget back into surplus. MIL has sold temporary water via the WaterWell sustainability product, $1.51m in 2022/23, and $6.84m in 2023/24, to supplement the revenue shortfall. Great progress has been made bringing the budget back into surplus; with key indicators of operational performance; gross profit, operational expenditure and sundry income all having favourable variances against budget and thus contributing to the surplus for financial year 2022/23.
It (MIL) has also greatly decreased the value of water delivery entitlements, turning them into a liability instead of an asset, because they yield the holders less water each year. The sale of temporary water strategy is not taking WaterWell away. MIL have delivered both a 3% resource distribution and a 5% water users' credit for the 2023/24 water season. Without the temporary water strategy, Delivery Entitlement Fees would need to increase by $11 per DE.

Fees and charges

Claim Fact
The previous MIL board …increased fees by 25% Fees & Charges have increased by 22% over 24 months (2022-2024) of which 12.1% comprised CPI, Government pass-through charges increased between 6.7% and 10.3%, and Board approved increases. One of the contributing factors to the increase over a 24-month period is that for financial years 2018/19, 2020/21 and 2021/22 certain fee increases have not kept up with the annual CPI increase. The Board have committed that fees and price will only rise by CPI and government pass-through for the five years commencing 1 July 2024 to 30 June 2029.
MIL allow NSW Water to use a third of the existing Mulwala canal capacity and charges $4/ML while charging growers approximately $40/meg for the same service (if MIL budget is $40m annually and government is using a 30% of capacity then they should be charged $12m). | MIL's business decisions mean growers are facing future delivery costs of over $100/ML - while government rates are $4/ML for the same services. Given they receive a third of MIL's assets they should be paying a third of the costs $12m - but are only paying $1m. The Government do not receive the same level of service. The schedule of charges lists the fees charged to WaterNSW, $4.71/ML for 2023/24, with a minimum annual fee of $471,000. IE WaterNSW pay for 100GL whether delivered or not. In addition, MIL receive a conveyance credit from Water NSW against each delivery. Both WaterNSW and DPE are second class customers, they receive no flow share, and on-farm deliveries receive priority passage. In 2021/22 we delivered 21GL for WaterNSW Escapes and charged $414,000 for this service, which equates to $19.71/ML, and in 2022/23 we delivered 24GL for WaterNSW Escapes and charged $440,000 for this service, which equates to $18.33/ML. In addition for each of these financial years we received a conveyance credit from WaterNSW.

Strategy, Governance and Board procedure

Claim Fact
It is a Director's duty is to ensure solvency. We are a not for profit and need to know our costs of operation before our revenue requirements. A 3-year operational expenditure forecast was produced during the business review. This lead to the Board approving operational expenditure budgets for financial years 2023/24, 2024/25, and 2025/26. The Board are aware of MIL's cost of operations given they have approved the budget.
Independent director employed by the past Board as a consultant is a conflict of interest Independent Director, Trisha Gorman, has formally declared this as a conflict of interest and does not participate when the Board votes on ICT Transformation items. Murray Irrigation has also previously engaged the services of a business owned by Member Director, Steven Fawns. Steven Fawns (representing the contracted business) has provided high risk training and assessment to the company on a number of occasions. Like the arrangement with Non-Member Director, Trisha Gorman, the commercial terms and conditions relating to these transactions are no more favourable than those which would have been applied if dealing with other suppliers at arm’s length in the same circumstances. Both Directors have declared their conflicts of interest at relevant times and also in the Board conflict of interest register which is presented to the Board every meeting. Neither director participates when the Board votes on matters relevant to their conflicts.
Independent director employed by the past Board as a consultant is a direct breach of the MIL constitution. This is not a direct breach of the constitution. See clause 28, page 12 of the constitution.
The board is operating at 10 per cent capacity (based on his [ADR facilitator Allan Parker AOM] reading historical minutes over an extended period) “During my [Allan Parker AOM] assessment, it has been apparent that in the past, pre November 30th, 2023, there has been various difficult times with the board process, yet still important progress was made. Since November 30th, the interactive dynamics, frequently result in inertia, and the reversing of decisions, outside of the formal process means thing keep turning up and progress is halted too often to be productive.” You can read Allan Parkers full response to this claim here.
The other independent director has stated publicly that current canal agreement of $4ML plus some conveyance is sufficient Robert Burbury detailed the current canal agreement at the customer information sessions held in September 2023. Please watch the recording of Robert Burbury explaining this in context here.
There is not even a board plan in place to protect the region There is a very clear strategic pathway the company is adopting. This is evidenced by recent visits to Canberra by the CEO and Chair (WC 12 February 2024). As well as recent visit by the CEO to Sydney to meet with the NSW Water Minister (WC 4 March 2024). As the Chair has previously shared with MIL shareholders, MIL is working closely with fellow IIOs to ensure we have a seat at the table in policy discussions.
There have been a series of important public IPART meetings where government is looking to pass through charges of over $60m, and MIL have been absent. MIL has had individual meetings with IPART. It would be inappropriate to have those discussions in a group forum and naive to think a public company should participate in that manner.
Never have I seen a worse run company than MIL MIL is well run; the Board, Management and Staff have achieved a $979,000 profit for financial year 2022/23. There is a sound strategy to invest in future infrastructure maintenance and upgrades, we have a DIFOT of 98.6% YTD average, and Channel Performance of 94.9% YTD average. There is a strategy to ensure the company is financially viable with long term intergenerational sustainability, while continuing to distribute maximum volumes to customers and putting downward pressure on fees and prices. MIL has delivered a 3% resource distribution and a 5% water users' credit for the 2023/24 water season; returning 170GL to the footprint, 70GL free of charge. MIL has a strong focus on government relations in an effort to limit impacts of the basin plan, and have quarterly meetings with WaterNSW Minister Rose Jackson, and have had direct contact with Federal Water Minister Tanya Plibersek. We collaborate with fellow irrigators ensuring we have a united voice. We continue to develop and promote Restoring Murray Waterways as a potential SDLAM project, and have secured $33.5M in Commonwealth funding for the next stage of this innovative environmental watering initiative. We have secured $2.7M of NSW Government funding to conduct load assessments on public bridges. The organisation is making a positive contribution to shareholders, the region and our communities. There are many other achievements not listed.
It has involved the re-establishment of a relationships with NSWIC who in their latest newsletter have flagged purchase of Murrumbidgee and Murray supplementary licenses as a potential source of water recovery under the basin plan because it is likely to have less 'production and socioeconomic impacts'. NSWIC do not support the purchase of supplementary water. NSWIC simply pointed out what was in the Aither report. NSWIC policy positions remains the same - 'No more water from the consumptive pool'.

Southern Riverina Irrigators MOU

Claim Fact
MIL's collection of the landholder levy for the landholder associations has been cancelled. The collection of landholders levies has not been cancelled, as we have not collected them. MIL cannot legally collect these. The previous funding of SRI and the LHA’s was from MIL’s consolidated revenues.
We objected at public meetings and advised growers of the facts in the media....for doing this, MIL cancelled our memorandum of understanding and removed LHA funding. In 2022/23 MIL paid $597,600 to SRI and LHA's out of consolidated revenues. MIL formally terminated the Memorandum of Understanding (MOU) and funding of SRI and the LHAs on 24 November 2023. These agreements were terminated as a result of a string of paid advertorials that SRI had published containing various inaccuracies and mistruths about MIL. These advertorials serve to diminish Murray Irrigation staff, management, our Board and, even more concerning, to tarnish the reputation of the company. SRI had not been acting in a professional or ethical manner, nor was it truly representative of the majority of shareholders. We know shareholder engagement is vital, and reassure Shareholders that there are many avenues for direct engagement with MIL. MIL trust this situation is a temporary setback in what has generally been a collaborative relationship between MIL and the above organisations, and look forward to the day when we can again work together in the best interests of our region in a professional and mutually respectful manner.

CEO Resignation

Claim Fact
The MIL Board has offered the CEO extra money to stay with MIL post the 30th June. No such discussion has occurred nor offer made. The CEO’s resignation is effective at the 30th June 2024.
The CEO must be staying as he has not yet listed his house on the market. The selling of the CEO’s house is a personal matter unrelated to his position.

Water Delivery

Claim Fact
In 2022-23, 40% of the water delivered through MIL was environmental water. Onfarm deliveries equaled 589GL, river operations 24GL, environment 190GL. This totals 803GL. 214GL divided by 803GL is 27%.
Last year 214,000ML of water was delivered for the environment and river ops while 588,000ML was delivered on farm. Collective revenue from the Escapes agreement and the Environmental agreement totalled $1.84m (excludes Government pass-through charges), and this alone has contributed 7% towards the operational expenditure for 2022/23. In addition these agreements contributed almost 60GL of conveyance water. Without these agreements, customers would not have received resource distribution through Waterwell, but pleasingly were provided a 6% distribution.
The volume of water delivered by MIL is now less than 800,000ML, down from a peak of around 1.6 million. The volume delivered annually by MIL has not achieved a peak greater than 1.2 million ML between 2002-2023.
Smarter guys than me will try to convince you the cost of water delivery on average is $23 as we were told at the business review meetings back in September by independent director Robert Burbury however I plead with you to do your own sums and you may be surprised how high the cost of water delivery really is. Murray Irrigation has an approximate 80% fixed fee / 20% variable fee structure, meaning it is the wrong metric to be reporting on the cost per ML to deliver water. Water delivered on farm is extremely volatile across seasons depending on price, allocations, and commodity prices while the cost to operate the system remains relatively constant. To measure the performance of the business on a cost per ML is not the correct metric. Although the cost for the 2023/24 season is $23.21/ML on average; $8.88 annual delivery entitlement fee, $6.23 annual asset maintenance renewal reserve fee, $8.10 MIL delivery fee, exclusive of pass-through charges, which aligns to what Shareholders were told by Director Robert Burbury
Last year just over 165,000ML of water was returned to shareholders via WaterWell, this year 105,000ML was sold on the market. MIL has delivered a 3% resource distribution and a 5% water users' credit for the 2023/24 water season; returning 170GL to the footprint, 70GL free of charge.
Last year farmers paid approximately $44million to take delivery of 588,000ML. According to the annual report 214,000ML was put through our system for government departments generating less than $2 million. Shareholders to their detriment continue to subsidise the cost of government usage in the MIL system. WaterWell, Canal Agreement and Delivery Entitlements (DEs) – the numbers
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