The advisory panel recommended the corporation would need to find millions of dollars of savings in operating, maintenance, overhead costs and capital expenditure, to maintain financial sustainability.
“The Connections Project, while providing enormous opportunities to improve the efficiency of the Goulburn Murray Irrigation District (GMID) also presents major financial challenges in the short, medium and long term, particularly as the project will reduce the GMID’s footprint, and hence revenues,” GMW Strategic Advisory Panel members, Mike Walsh, Suzanne Ewart and David Heeps, said.
They based their report on a 50-year financial model, developed by consultants Marsden Jacob Associates (MJA) to assess the corporation’s long term financial stability.
The panel said, in the next six years, the business would need to find savings of nearly $10million a year, in addition to the $474m cost reductions and $15.2m in efficiencies already identified over the next 25 years.
The panel, which reviewed the business, said the organisation needed to achieve significant annual savings, particularly in the gravity irrigation business.
The panel also advised GMW needed to find even greater efficiencies, 29pc, for the pumped irrigation, drainage, water districts and fee for service businesses from 2019/20.
The panel said GMW could not increase prices, as that would “significantly adversely impact Goulburn Murray Irrigation District (GMID) producers’ competitiveness.
“Achieving this level of savings over and above initiatives and efficiences GMW has already identified, to 2022, will require GMW to go well beyond ‘business as usual’,” the panel found.
“Indeed, it requires an urgent and significant transformation to GMW’s business, and how it operates.”
“The short term savings required is estimated at $1.4 million in capital expenditure and $8.3 million in total operating expenditure (operations, maintenance and overheads),” the panel found.
“If more capital savings are achievable, then the estimated operating cost savings could be reduced accordingly.
“In the gravity irrigation business, this is equivalent to an average annual saving of $1.4 million in capital expenditure and $4.8 million in total operating expenditure (labour, operations, maintenance and overheads).”
The panel was critical of the rationale behind refurbishing “under utilised assets,” saying 43 per cent of channels held less than two delivery shares.
“Indeed, 34pc of channels delivered less than 50megalitres, with a further 13pc delivering between 51 and 100ML during the 2017 season”
The panel members said there was scope to reduce the irrigation footprint, by negotiating with landholders on under-utilised channel.
“There are significant opportunities to adopt a risk based asset management approach, whereby heavily utilised assets are given priority over under-utilised assets, when works are deemed neccesary,” the panel found.
It recommended the establishment of a dedicated Transformation Panel, immediately, to lead change, within the business.
“It will translate the findings and recommendations of this report to GMW and draft a preliminary transformation delivery plan,” the panel members said.
A Transformation Manager should then be appointed.
Water Minister Lisa Neville said the government accepted all of the panel’s 30 findings, which provided a road map to transform the business, and ensure the long-term future of the region.
“We want to support GMW to ensure it can meet current challenges, so it can maximise investment and grow the irrigation district to support jobs and vibrant regional communities,” Ms Neville said.
She said the recommendations had to be implemented by 2020.
• Creating a simplified business structure for better community transparency
• Better management and utilisation of GMW assets into the future and delivery of capital projects
• A new customer engagement program to improve customer and stakeholder trust, and performance management
GMW chair Jo Anderson said the report would support the corporation in ensuring prices stayed low for customers and it could continue to grow and develop the irrigation district into the future.