External investor could be key to getting Rookwood built
AN EXTERNAL investor may be the way forward for Rookwood Weir, according to CQUniversity economics professor John Rolfe.
But the $352 million project would have to show a commercial return, something which Prof Rolfe was sceptical it could deliver based on the business case made public by the State Government this week.
Joint project proponents SunWater and the Gladstone Area Water Board developed the business case with Building Queensland considering demand, pricing, funding and financing models, delivery and operating models, costs, risks and benefits.
Having considered the business case since its release, Prof Rolfe said most of the scenarios proposed show the project does not quite deliver a commercial return.
He said there was one situation which could be viable, based on high return crops being produced and exported.
However, he warned that viability was also based on whether those crops could be exported overseas, with very little opportunity to get high volumes of production for domestic markets.
Prof Rolfe also said the figures may not reflect the general crop market.
"The returns they estimated from high value agriculture are pretty high, so I do have concerns that it is going to be very difficult to generate returns out of high value agriculture and make it worthwhile," he said.
Prof Rolfe said viable crops would have to focus on products which haven't been grown commercially in Central Queensland before, including mangoes, macadamia nuts and other high return crops.
"The tricky thing is to get the scale of production early on so you can make a new market work," he said.
"There's very little market in domestic markets for new horticulture. It has to be an overseas market to make this work.
"I don't think it can be done on CQ's normal crops such as cotton and mung beans."
There are advantages to Rookwood Weir which place it in a unique position, though.
"I would think that there is as strong a case for this proposal as for any major agriculture infrastructure development around Australia," Prof Rolfe said.
"That's because we're in a unique position in two key ways and that is we would have at least half the water going to industry and urban, which really underpins the business case.
"The second thing is this is in an area of potential supply to Asian markets, it's very close to wonderful transport infrastructure (the international airport in Rockhampton and the port in Gladstone).
"We've got a lot of the bits of the puzzle ... and very close to making it work."
The business case revealed Rockhampton was at risk of running out of water and, based on today's population, water use, storage and operations, would have faced a shortfall in 1902.
Modelling showed the Fitzroy River Barrage could fall below minimum operating level once in 108 years at current demand.
However, Prof Rolfe said the volumes required by Rockhampton and Livingstone, even in these potential times of crisis, were not high enough to justify full government investment in a project without commercial viability.
He said previous drought experiences also showed residents preferred to cut back supply rather than pay for more water.
Prof Rolfe said the next step was to work out who would be the main proponent on this and who would market Rookwood to a potential third party investor.
"We need a clear pathway on how it will be marketed to get the extra player into this."