Water’s foreign buyer register has mixed appeal

Foreign agribusinesses and investment groups will have to declare their permanent water assets with the Australian Taxation Office from next December.

The move is welcomed by the farm lobby for potentially bringing more clarity to debate about the sector’s asset owners, although those in the water trade say foreign ownership does not tend to generate much discussion among water users.

The water register also seems unlikely to create the sort angst among investors which accompanied the farmland register’s launch last year.

Most significant water assets currently held by foreign investors are connected to similarly significant irrigated production ventures such as Singaporean agribusiness, Olam’s big almond plantations along the Murray River.

Victorian government estimates suggest only about four per cent of that state’s 2 million megalitres of tradeable water, at most, is owned by investors who do not own farmland.

Federal government figures suggest 13.7pc (or 1808 gigalitres) of all water entitlements on issue in 2013 have some level of foreign ownership — up from about 8.5pc in 2010.

However, those figures no longer include one of the most significant offshore investors, the big US water investor Summit Holdings Group which quit the local market last year, selling its portfolio to local investment funds.

A key beneficiary from the Californian company’s departure was the new Aware Water investment group, owned by former ports bosses Chris Corrigan and Peter Scanlon, which picked up much of Summit’s entitlements.

The federal government’s new register has been applauded by producer groups such as the Victorian Farmers Federation.

President David Jochinke said water was the backbone of farming and single acquisition trades were becoming more numerous each year.

“It makes sense that the ownership register Australia maintains for foreign owned land should be extended to our water assets.”

National Irrigators Council chief executive officer, Tom Chesson, agreed “misinformation was the enemy of good policy”, so more facts about who owned what would help the water industry.

However, he felt most sensitivity about water asset ownership was “pub talk” and emotions about foreign investment often fluctuated depending on who was selling and where new buyers might be from.

While both overseas and local investor groups have been more active in the past decade, chief executive officer of trading exchange Waterfind Australia, Alister Walsh, said irrigators were still overwhelmingly Australian farmers –  for purely practical reasons –  and were likely to stay the predominant owners of our water assets regardless of who else was interested.

He noted outside investors invariably had their own landholdings with irrigation needs, too, however these funds also delivered valued extra liquidity to the market.

Their pooled entitlements gave other farmers the chance to trade in or out of the irrigation water market in response to commodity prices and seasonal conditions.

Mr Walsh said investor groups could not take water out of the market for two or three seasons to distort the price, or “put it on a boat and sell it to China”.

“If you’re a water market investor the only way you make a dividend is to use that water to produce something, lease it to somebody else, or sell the season’s allocation on the temporary market,” he said.

“Every year that water right must be used or else its value to the owner is lost.

“If you buy water, you can’t afford to just sit there and not get a return.”

Although a foreign investment was a politically sensitive issue in some circles, Mr Walsh said broadly speaking he doubted farmers felt disadvantaged by overseas owners in the water industry.

“Some people probably want to make political mileage by listing the 10 biggest overseas owners of our water resources, but Australian agriculture has always relied on foreign capital to provide the investment liquidity we need and the irrigation industry is still no exception.”

General manager of the big Ruralco Water business, Phil Grahame, said investment funds with active interests in water emerged after 2007, when investors no longer had to own land in the Murray Darling Basin to be eligible to buy and sell its water rights.

“It’s very much a mix of investment sources –  some of the bigger investors are the likes of VicSuper,” he said.

VicSuper’s stake in the Victorian water market has been reported to be worth at least $110 million, almost all of which is leased back to farmers.

The most significant buyer was the Commonwealth Government, spending about $10 billion to acquire what would amount to about 22pc of the basin’s water entitlements and already was about 70pc towards its 2750Gl target.

Mr Graham said specialist fund managers such as Blue Sky Funds, Kilter Rural and the newly listed Duxton Water, were likely to have overseas investment support, but were basically Australian businesses.

Federal Agriculture Minister, Barnaby Joyce said  the water register legislation would help address community concerns about insufficient information on foreign ownership of Australian agricultural assets and natural resources.

“It is important we have a clear and accurate picture of the level and trends of foreign investment in our water access entitlements,” he said.

“A commonly held perception that the level of foreign ownership in Australia has been increasing was confirmed recently through the implementation of a foreign land register.

“A total landmass more than twice the size of Victoria is foreign owned and similarly, when it comes to water, we need to know who owns what.”

He said the register was developed jointly by the Treasury and the Department of Agriculture and Water Resources, in close consultation with stakeholders, including industry and state and territory governments and a summary of foreign-owned water entitlements would be available on the tax office website.

However, Waterfind’s Mr Walsh believed Canberra could probably save itself a lot of extra effort and expense by helping state governments  co-ordinate the effectiveness and transparency of their respective water trade authorities, particularly in Queensland, NSW and South Australia.

Victoria, with funding help from Canberra, had developed the sort of detailed and effective trade register model which could be adopted nationally.