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| Photo: Heykellieee |
Hundreds of irrigators in north-west Victoria will be burdened
with repayments on a Goulburn-Murray Water (G-MW) pipeline loan for a
generation longer than expected, despite massive fee increases.
Amid concern from irrigators about a lack of information on where
their money is going, Woorinen irrigators’ committee organiser Vicki Holland
has said nearly a decade after pipeline repayments began there has been no dent
made in the $15.4 million principal owing.
“[We were told] the capacity share fees would pay off the loan in
40 years,” Mrs Holland said.
“Now they’re [G-MW] telling us it will take 75 years to pay it
back.”
The extension in the life of the loan comes despite the fact the annual
fee, formally known as an infrastructure access fee, will have more than
doubled since 2003 if recent proposed increases are approved.
G-MW has disputed there is
trouble with the loan repayments.
“The Essential Services
Commission have set the loan repayment of 75 years and current repayments and
principal is at the level required for this stage of the project,” the water
corporation said.
G-MW officials announced at a public meeting in Woorinen in April
a proposed 12 per cent increase in annual capacity share fees, with the fee
from July 2012 to be $4,650 per share.
“It was $2,180 per share in 2003,” Mrs Holland said.
Irrigators at the meeting “were irate to say the least”, she said.
The significant increase in the share fees come despite pipeline
irrigators being told their initial capacity share fee would only increase with
the CPI each year, Mrs Holland said.
Stock
& Land has seen G-MW documents indicating the pipeline debt had soared
from $15.6 million at the end of the 2005 financial year to a forecasted $18.6
million by 30 June 2011.
The G-MW documents indicate the increase in debt was due to under recoveries from earlier years and up-front contributions not being collected from new entrants, in addition to the capitalised interest.
Mrs Holland, wife of the irrigators’ committee chairman Mike
Holland, said irrigators were informed at a meeting in September last year of
the loan term blow out.
The new loan term means irrigators still have to pay
in the vicinity of $80 million before the debt is cleared, if the
fee were to be capped at the proposed July 2012 rates. That figure, based on
244.7 capacity shares in the pipeline area, means share fee payments
after the previous end date would top $50 million.
Repeated requests to G-MW for the current loan figure and the
amount of repayments already made have not seen a response.
After seeing no choice but to make an FOI request to G-MW for
financial statements, Vicki Holland was provided with a bundle of balance
sheets and profit and loss statements by one of the water authority’s managers in March.
The incomplete set of documents has failed to provide reassurance,
with recent years’ statements not included and no repayment figures showing.
“On the profit and loss statements, under liabilities there is no
loan, or payments against the loan showing,” Mrs Holland said.
“The profit and loss sheets are ridiculous.”
Profit and loss statements and balance sheets from the last two financial
years were not provided, as they had not been finalised, Mrs Holland said.
“They can’t give us a specific figure of what they have paid
back,” she said.
Despite a lack of public financial information, G-MW managing director Gavin Hanlon has indicated some progress has been made on the debt.
"[The] G-MW component of the Woorinen project was predominantly debt financed and the debt associated with the project has started to be repaid. Just like a home loan, in the early years of a loan the vast majority of each payment goes to paying interest and only a small portion goes to reducing the principal," Mr Hanlon said.
Mr Hanlon said the water authority was "working closely" with the Treasury Corporation of Victoria to ensure the financing costs had as minimal impact as possible.
The price rises and apparent lack of repayment progress has
created uncertainty for many of the 236 irrigators in the area.
“This is causing a lot of
heartbreak for a lot of people,” Mrs Holland said.
While she said there has “probably” been some defaulting by
irrigators, leaving the pipeline is expensive.
“It is impossible to sell your
capacity share as no one wants to take it on due to the rates - you can give it
back to GMW but you have to pay [them] 10 years rates to do so.”
Irrigators have been critical of the lack of response by local
member, Water Minister Peter Walsh, who they asked to intervene in the issue.
Stock
& Land reported in April that Mr Walsh had requested a review of G-MW
management and operations, with the authority posting a before tax net loss of
$52.9 million last financial year.
While it is not clear if the Minister requested specific attention
to the Woorinen pipeline finances, it has been reported an independent audit of
pricing in the area is under way.
"The Woorinen pipeline customer group needs to
continue to work with Goulburn-Murray Water to resolve their issues," Mr
Walsh said.
Vicki Holland believes government intervention is
now required.
"The Government needs to take control of this
debt before it increases any further," she said.
The latest 12 per cent increase will require Essential Services
Commission approval before taking effect. Last year the ESC blocked a proposed
58 per cent fee increase by G-MW, with a 14 per cent rise instead occurring.
The debt figures are understood not to include any of the $3 million of costs the water corporation last year agreed to bear from failed legal cases and confidential settlements relating to the pipeline.
by Matthew Raggatt
Published in Stock & Land on 24 May 2012
