State's first desal order: not a drop, thanks

Victoria’s beleaguered desalination plant has suffered another setback with the Baillieu government declaring the state will not need its water for 2012-13, the plant’s first official year of operation.

Pointing to healthy and rising dam levels, water savings by Melburnians, and the fact that the plant will not be completed by its June 30 deadline, Water Minister Peter Walsh has confirmed the government had opted for zero water in its first formal order to the plant operator, the AquaSure consortium.

News that Victoria will not take one drop of water initially from the multibillion-dollar plant follows the Baillieu government’s decision to mothball another expensive new water source, the $750 million north-south pipeline.

Under the desalination contract, the government is required to forecast Victoria’s needs for the following financial year and make an order of between zero and 150 gigalitres of water by April 1 each year.

“Melbourne’s dams are holding almost 1200 gigalitres (currently 64.8 per cent full) and we are coming into the winter/spring filling season with wet catchments,” Mr Walsh said.

The government’s decision against buying water is a further blow to the finances and image of the desalination project.

Last week Leighton Holdings, the parent of consortium construction partner Thiess, announced a further $106 million writedown in profits from the plant, which is months behind schedule. The troubled construction giant now expects to lose more than $600 million on the Wonthaggi project.

As The Age revealed in February, AquaSure has lodged a $1 billion-plus claim with the government for delays blamed on bad weather and industrial strife, and a one-year extension of the project deadline.

The government has not publicly responded to the claims but the recovery in Melbourne’s water storage capacity has put it in a strong position to resist any requests for assistance beyond the project contracts struck by the former Brumby government.

Its ability to say ”thanks but no thanks” to AquaSure is a further embarrassment to Labor which, fearing Melbourne could run dry due to decade-long drought, promised to have Australia’s biggest desalination plant producing water by the end of 2011.

The government’s decision not to buy water for the first year has relieved Victorians of some heavy costs. The full 150 gigalitres would have cost Victorians $109 million for 2012-13, had the government opted to buy it.

However, the real financial burden is in the water ”security” payments for the luxury of having the desalinated water available, whether water is ordered or not.

Under the contract, Melbourne water users would have been required to pay $654 million in 2012-13 in such payments although that figure is expected to be reduced because the plant will not be operating for the full year.

The water security payments make up about $18 billion of the $24 billion nominal cost (based on 150 billion litres of water every year) of the project over its lifetime. Victorians will be paying for the plant for nearly three decades.

AquaSure spokesman John Ridley said the government decision to order no water was ”neither a surprise nor a problem”.

”Our finances are secure and we can manage a nil order without jeopardising the company or the project,” he said.

The Age revealed major delays at the Wonthaggi work site as early as August 2010. But both AquaSure and Thiess have been reluctant to acknowledge on-site or financial problems since work began in 2009.

Did you find this article useful? Join the EB Circle!

Be part of our community and get access to our events and programmes by supporting our journalism. Thank you.

Most popular

Featured Events

Publish your event
leaf background pattern

Transforming Innovation for Sustainability Join the Ecosystem →

Strategic Organisations

ESG Book
City Developments Ltd