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Murray Irrigation to fork out extra $21 million

Infrastructure improvements could cost up to $206 million - more than first expected - according to Murray Irrigation chair Bruce Simpson.

August 15, 2014 2:00am

Murray Irrigation Limited could spend at least $21million more on infrastructure improvements than first expected.

MIL chairman Bruce Simpson said the additional cost would be purely dependent on the company’s ability to meet infrastructure target reductions.

This first stage of MIL’s Private Irrigation Infrastructure Operators Program was expected to cost $185 million.

With its winter program expected to be complete and its targets reviewed ‘‘very soon’’, Mr Simpson confirmed the projected cost could be up to $206 million.

Mr Simpson said the costs were directly linked to the number of outlet meters that can be reduced throughout the project and that MIL was working to control those targets.

‘‘The forecasted increase in capital expenditure is not driven by unit cost, but by the number of units (to replace Dethridge wheels) that need to be installed,’’ he said.

‘‘The unit cost is predictable, but the number of units we would need continues to move.

‘‘The extra capital required in this one stage of the program will be drawn from company reserves.

‘‘Replacements are a moving number and as those targets move around it does have an impact on costs.

‘‘We are constantly monitoring the program, including the drawdown on reserves.’’

The PIIOP program will allow MIL to meet new government imposed water measurement standards by 2020.

Dethridge wheels are being relocated or removed to make way for new technology that will allow remote control and/or automation of both the offtakes and outlets.

‘‘The majority of Dethridge wheels have to go, so we have worked on the rationalisation of replacements,’’ Mr Simpson said.

‘‘There has been strategic collaboration and coordination between the company and the landholders to see if it could lead to a reduction in the number of outlets.

‘‘We have found that it is sometimes impossible to remove the outlets because of farm topography or infrastructure, including roads.

‘‘Our primary objective is to deliver water effectively and efficiently, and therefore we have an obligation to replace an outlet if there is no reasonable alternative.

‘‘We also have regulators that control channels and maintain water heights. The more successful we are in reducing outlets, it means we can also reduce these.

‘‘At this stage we are short of our expected target, which is driving the cost up, but we are working closely to get closer to those targets.’’

In a report to the company and its shareholders last month, MIL deputy chair Michael Hughes said savings were made within the Blighty Pilot Project when outlet reductions exceeded expectation.

The company had estimated a 30 per cent reduction but was able to achieve reductions in excess of 40 per cent because of reconfiguration projects.

In the same report, Mr Hughes said the current rate of reductions was well below the Blighty results. He said only a 16 per cent reduction had been achievable with a few small scale reconfigurations.

Mr Simpson said it was possible for the cost increase to be made up elsewhere, saying other MIL divisions yet to start the PIIOP program have ‘‘inherent differences’’. There are 21 MIL divisions in total.

He said the more outlets MIL can remove throughout PIIOP, the lower the company’s capital and maintenance costs will be.

The complete project, which started in June 2013, is expected to be complete by 2017.

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