gladstone regional council integrated water strategy client namegladstone regional council project...

Gladstone Regional Council

Integrated Water Strategy

Client Name Gladstone Regional Council

Project Name 1770/Agnes Water – Integrated Water ProjectDate 8 April 2008



> Background to Water in 1770/Agnes Water Region> Key Issues> Integrated Water Project

– Options Considered– Technical Solutions– Environmental Approvals– Review Process

> Tender Process– Tender– Comparison of Offers– Comparison to Budget

> Contract Structure– Condition Precedent and Contract Position– Contract Payments

> Community Consultation> Financial Modeling> Recommendations

Summary



> Rainwater tanks only supply till 1992> Sand excavation trench, bores and treatment installed> Reedy Creek water strategy

Water Supply



Water Supply – Trench



Water Supply - Bores



Water Supply – Treatment Plants



Water Resources



Water Supply - Bores



Water Resources



Ground Water Investigations



Defined Water and Sewerage Area

> The ultimate population for Agnes Water/1770 in the defined Water and Sewerage Areas is 26,500 ep

> Water Supply required - 2,000 ML/annum > Only 2 technical options

- Desalination- Pipeline from Gladstone



Comparison of Options

Capital and NPV comparisons (6% growth)

$0

$20

$40

$60

$80

$100

Total CapitalCost ($m)

Net PresentCost ($m)

Year 1 Cost

Co

st

($m

)

Awongapipeline

Eurimbulapipeline

DesalinationPlant



Water Supply Strategy

> Continued incentives for efficient use of water> Develop additional temporary bores at Red Pit> Extend the reticulation pipes to the Red Pit and feed

water back to Agnes Water> Construct a Desalination Plant



1770 Water Supply

> Rainwater tanks> Private bores to supplement requirements> Small local bores supply caravan park and public toilets> Evidence of groundwater contamination in some private

bores> Decision made to extend the water supply scheme to

1770 in consultation with Community



> Septic tanks only treatment till 1993> Reticulation and treatment plant completed in 2001> Treatment plant located 8km south of Agnes Water> Facultative lagoons (35 ML) and land based disposal to

an irrigation area (36 Ha) adjacent to Deep Water National Park

Sewerage Background



Sewerage Treatment and Disposal



Wastewater – Lagoon System



Wastewater – Disposal Area



> Permanent Restriction since Sept. 2000> High Water and Wastewater Pricing

Key Water Issues



> Population Growth in Serviced Area

Key Water Issues



> Lack of Reliable Water Supply

Key Water Issues



> Over-commitment of Water Supply

Key Water Issues



> Water Quality from bores is excellent; but trenches difficult to consistently treat satisfactorily

> Lack of Water supply in 1770> Groundwater Contamination in 1770> Poor quality of treatment infrastructure > Difficulty in recruiting & retaining professional and

technical staff

Key Water Issues



BOD Results

Licence limit

Key Sewerage Issues – EPA Failure

BOD5 Chart

-20

0

20

40

60

80

100

120

140

160

180

19-Apr-01 5-Nov-01 24-May-02 10-Dec-02 28-Jun-03 14-Jan-04 1-Aug-04 17-Feb-05 5-Sep-05 24-Mar-06 10-Oct-06 28-Apr-07

Date

mg

/L

MP02/1 Lagoon 3 Outlet Lagoon 4 Outlet Acceptable Limits

Linear (MP02/1) Linear (Lagoon 3 Outlet) Linear (Lagoon 4 Outlet)



Nitrogen Trend in Run-off Water

Total Nitrogen

-3

-2

-1

0

1

2

3

4

5

6

6-Dec-99 19-Apr-01 1-Sep-02 14-Jan-04 28-May-05 10-Oct-06

Date

mg

/L

MP97/1 MP97/2 MP97/3 MP97/4 MP97/5 97/6

M2 MP00/9 Linear (MP97/1) Linear (MP97/2) Linear (MP97/3) Linear (MP97/5)

Linear (MP97/4) Linear (97/6) Linear (M2)

Storm Water to Deepwater National Park



Key Sewerage Issues

> Wastewater Capacity needs to be increased as at current licence:– Poor track record with existing system– EPA preference for higher value re-use

> Limited options for reuse of treated wastewater



> Council commitment to sewer 1770> Council commitment to supply drinking water to 1770> Modular desalination plant> Modular wastewater plant> Outsource operation of existing Agnes Water wastewater

lagoons and water treatment plant to address professional staff issue

> Outsource operations, maintenance, asset replacement and upgrades to new water to wastewater treatment facilities

> Provision of additional services to Council.




> Conventional reticulated water to the town of 1770 > Low pressure sewer to the town of 1770

– Difficult terrain– Rock outcrop– Existing roads and services– Established residential landscape

Technical Solutions Proposed



Membrane Operating Ranges

0.001 0.01 0.1 1.0 10 100 1000

Bacteria

Coal dust Beach sand

Metal ions

Aqueous salts

m (log)

Relative Particle Sizes

Ultrafiltration

Virus

Microfiltration

SeparationProcess

Effective pore size

Nominal pore size

Cryptosporidium Giardia



Membrane Filtration

Air

Bacteria

Virus

Solids

Treated effluent

Membrane



> Conventional Desalination plant– 7.5 ML/d intake pipeline (25,000 ep)– 1.5 ML/d modules




> Modular MBR Wastewater– 600 KL/d with 300 KL/d Membrane




Technical Solutions - Layout



> Commonwealth Environmental Approval under the Environmental Protection and Biodiversity Conservation Act – deemed to be not a controlled action;

> Joint Marine Parks and Great Barrier Reef Marine Parks Approvals;> Environmental Protection Agency – Prescribed Tidal Works Approvals;> Queensland Transport – Maritime Safety approval;> Cultural Heritage Management Plans agreed with representatives of

traditional owners; and> Department of Natural Resources is prepared to sign off resource

entitlement for easements and Permits to Enter for the project Modification required to match alternate pipeline route

Environmental Approvals



> DNR approval of planning reports for the project and DLGP funding commitment of $23m

> Cardno (Qld) Pty Ltd reviewed the costs of the pipeline options and desalination option

> John Chappell Engineers reviewed the offshore pipeline alignments that were proposed in the Parsons Brinckerhoff Feasibility Report.

> Review of the financial capability of shortlisted proponents by Probity Investigators Pty Ltd indicated that they were financially suitable for the project.

> Jacob Marsden & Associates carried out Present Value analysis of the tendered desalination option and estimate for pipeline indicating a minimum difference of 16%

> QTC have reviewed and are satisfied with the financial planning for the project

Peer Review & Checks



> Project structured to attract quality Operator> Formal Tender Process Completed

– Transaction Manager – formal planning of Tender Process– Engineering, Legal and Probity Advisors

> 3 Respondents qualified under EOI process> 2 Technical competent offers received> DLGP provided with early advice on additional funding (7 Nov. 2007)> Probity and Evaluation plan followed> United Utilities Australia (UUA) recommended> Minister meeting and support 9 Jan 2007> Ministerial approval to sign contract> Negotiation to lock in prices, options and final agreement> Contract signed 16 January 2008 subject to Condition Precedent

Tender Process



> DLGP request for review of Pipeline v’s Desalination> Full NPC cost comparison by Marsden Jacob > Desalination prices:

– Fixed tendered price– Maximum price model (risk adjusted)– Potential cost reduction of ~ $3.0m not included– Include full asset replacement– Include bore treatment plant and system management

> Pipeline price was Cardno estimate only. > Desalination NPC was materially lower by 16%

Desalination v’s Pipeline



Desalination v’s PipelineObjective Pipeline DesalinationCost and Funding

Maximise State Funding 40% available 80% available

Minimise Capital Costs $42.3M plus 18 months inflation

$24.59M

Capital Cost Certainty Council risk Fixed Price

Operations

Operations cost certainty Council risk Fixed Price

Operations performance certainty Council risk Fixed Price

Compliance

EPA wastewater Compliance Delay of 18 months Contract signed

Water supply and groundwater contamination Delay of 18 months Contract signed

Professional & Operations Staff Issue remains Contract Condition



> The Operator will, at its own cost and risk, design, construct, operate, repair and maintain each Facility so that it can provide the Services to at least the Quality Standards;

> Unless the Council expressly agrees to bear any risk … without limitation the Operator will accept the risk, whether or not this agreement refers to the risk;

> The Operator shall perform the obligations in accordance with the Minimum Standards and this agreement on the basis of the Operator’s Submission; and

> The Council shall pay the Operator for designing, constructing and operating each Facility to at least the Quality Standards.

Scope of Agreement



Contract Structure> Contract Price

– All inclusive with allowance for rock, acid sulphate soils and difficult geotech in sea water pipeline

> Form of Contract – Design, Build, Operator and Assist*

> Team – 10 years plus two 5 year extension (Council Option)

> Similar and Reference Contracts – Wagga, Wodonga, Noosa (2), Redcliffe, Bendigo etc.

Activity Responsibility

Design UUA

Construction UUA

Operation UUA

Maintenance UUA

Asset Replacement UUA

Payment Council

Land Council

Pre-existing Contamination

Council

Approvals Joint



Contract Structure> Security of $3.0 million reduced to $1.5 million after commercial acceptance and

performance trials;> Liquidated Damages:

– Water Treatment Plant ($2,000/d), – Wastewater Treatment Plant ($2,000/d) and – 1770 Pipeline ($2,000/d);

> Onus of Proof – is on the Operator.> Toll Abatement (Revenue Deduction)

– Pre determined % reduction in toll;– Maximum is 20% (eg Reservoir level not maintained)– Abatement is to maximum level– 6 individual monthly failures over one year can lead to Contract default and costs.

> Variations– Pre- agreed deductions for sea water pipeline (subject to Geotech)– Pre-agreed rates for rock and acid sulphate soil– New variations to be signed off by Authorised Officer



> 2 Public Meetings in 2005– 50% community support

> Community Reference Panel (CRP)– Nomination called in 2007– Representations for development, social and indigenous area are

nominated– Purpose is to inform and provide feedback from the community;

> UUA supportive of CRP

Community Consultation



> 20 year financial model– Review Marsden Jacob – Review and audit by QTC– Council provided individual water and wastewater reserves for funding capital works– Assumed 4.5% Council cost increase– No additional rate increase – Assumed PIFU growth of 6.5%– Full user pay with no ratepayer subsidy

> Affordability - Refer Section 6.3 of Report– State funding approved to $23M (SCAP and WASP funding)– Additional $4.8M required (normal 40% WASP funding)– Additional $5.9 M (DLGP funding)– Combining water and sewerage business units– Internal loan from Constrained Works Reserves (Developer Water and Sewer reserves) for

initial 7 yearsNo cross subsidy from general rates

Financial Modeling



> The Agnes Water - Water supply scheme is overcommitted and requires immediate augmentation

> The sewerage treatment plant is not performing satisfactorily and requires immediate remedial action

> The sewerage scheme requires remediation and additional treatment capacity> Council undertaking to provide reticulated water and sewerage to 1770 to alleviate health risks> Pipeline options considered at key stages since 1992 have not proved economic or affordable> There is no alternative proposal that can meet the objectives or deadlines required by this

project> The Integrated Water Strategy has been examined and peer-reviewed by engineers, scientists,

State Government Departments and Queensland Treasury Corporation, and is recognised as the most economical and affordable water supply option for Agnes Water/1770

> Council has a low risk contract with one of the Worlds Best Operators> There is substantial financial assistance from the State Government for the project.

Summary



Recommendation

Recognising the needs of the community of 1770 and Agnes Water for secure and reliable water services, Council continue with the Integrated Water Project and proceed to attain additional funding to satisfy the Condition Precedent.

Recommendations - Refer Section 7 of Report



> Secure additional State Funding from DLGP by 22 April 2008

> Develop Contingency Plan for alternate funding– Funding alternatives– Extension of Condition Precedent Time Limit

Strategy Moving Forward



QueenslandGround Floor171 George StreetBrisbane QLD 4000 Australiat +617 3228 0700f +617 3228 0799

VictoriaLevel 10350 Queen StreetMelbourne VIC 3000 Australiat +613 9691 0088f +613 9691 0001

www.perongroup.com.au

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