Client NameGladstone Regional Council

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Client Name Gladstone Regional Council Project
Name 1770/Agnes Water Integrated Water
Project Date 8 April 2008
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Summary

• 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

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Water Supply

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

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Water Supply Trench
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Water Supply - Bores
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Water Supply Treatment Plants
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Water Resources
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Water Supply - Bores
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Water Resources
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Ground Water Investigations
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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

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Comparison of Options
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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

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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

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Sewerage Background

• 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

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Sewerage Treatment and Disposal
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Wastewater Lagoon System
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Wastewater Disposal Area
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Key Water Issues

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

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Key Water Issues

• Population Growth in Serviced Area

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Key Water Issues

• Lack of Reliable Water Supply

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Key Water Issues

• Over-commitment of Water Supply

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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

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Key Sewerage Issues EPA Failure

• BOD Results
• Licence limit

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Nitrogen Trend in Run-off Water
Storm Water to Deepwater National Park
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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

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Integrated Water Strategy

• 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.

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Technical Solutions Proposed

• 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

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Membrane Operating Ranges
Effective pore size
Nominal pore size
0.001
0.01
0.1
1.0
10
100
1000
?m (log)
Relative Particle Sizes
Virus
Bacteria
Metal ions
Coal dust
Beach sand
Aqueous salts
Cryptosporidium
Giardia
Separation Process
Ultrafiltration
Microfiltration
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Membrane Filtration
Solids
Virus
Air
Treated effluent
Bacteria
Membrane
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Technical Solutions Proposed

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

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Technical Solutions Proposed

• Modular MBR Wastewater
• 600 KL/d with 300 KL/d Membrane

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Technical Solutions - Layout
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Environmental Approvals

• 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

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Peer Review Checks

• 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

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Tender Process

• 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

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Desalination vs Pipeline

• DLGP request for review of Pipeline vs
  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

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Desalination vs Pipeline
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Scope of Agreement

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

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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.

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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

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Community Consultation

• 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

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Financial Modeling

• 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 years
• No cross subsidy from general rates

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Summary

• 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.

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Recommendations - Refer Section 7 of Report

• 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.

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Strategy Moving Forward

• Secure additional State Funding from DLGP by 22
  April 2008
• Develop Contingency Plan for alternate funding
• Funding alternatives
• Extension of Condition Precedent Time Limit

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