Victoria state announces Melbourne water costs

The government of the Australian state of Victoria announced on 26 November 2009 that delivering the Melbourne Desalination Project as a public-private partnership will save Melbourne water users almost Aus$ 1 billion (US$ 915 million) or 14% of the total cost, compared with construction by the state.

Water minister Tim Holding, who tabled the project summary in the state parliament and released the project contract, said the Public Sector Comparator showed the financial benefits of the private sector building and operating the plant.

“The desalination project is absolutely vital to securing Victoria’s water future because it turns seawater into drinking water, delivering a rainfall independent source of water,” Holding said. “It is our insurance policy to ensure that we won’t run out of water during severe droughts and as our climate changes. This project summary shows that this is a value-for-money solution to our state’s long-term water needs and a better option than continuing to rely exclusively on rainfall collected in dams.”

The Victorian Government selected the AquaSure consortium consisting of Suez Environnement, Degrémont, Thiess and Macquarie Capital Group as the successful tenderer. As revealed in July, when AquaSure was announced as the successful consortium, the capital cost of the project is Aus$ 3.5 billion (US$ 3.21 million). The PPP model ensures that taxpayers do not bear the risk of capital overruns.

The total maximum net present cost to the state over the 30-year contract term of the project is Aus$ 5.7 billion (US$ 5.23 billion), which equates to a cost of Aus$ 1.37 (US$ 1.26) per m³ of water. This includes construction, financing, operating costs and using 150 million m³ of water every year for the next 27.75 years (the full contract operation period).

Had the Victorian Government delivered this project, it is estimated that it would have cost $6.7 billion. The desalination plant and the pipeline will be handed back to the state in full operating condition, at no cost, in 2039.