Gladstone Regional Council Integrated Water Strategy Client NameGladstone Regional Council Project Name1770/Agnes Water – Integrated Water Project Date8 April 2008

Gladstone Regional Council Integrated Water Strategy > 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

Gladstone Regional Council Integrated Water Strategy >Rainwater tanks only supply till 1992 >Sand excavation trench, bores and treatment installed >Reedy Creek water strategy Water Supply

Gladstone Regional Council Integrated Water Strategy Water Supply – Trench

Gladstone Regional Council Integrated Water Strategy Water Supply - Bores

Gladstone Regional Council Integrated Water Strategy Water Supply – Treatment Plants

Gladstone Regional Council Integrated Water Strategy Water Resources

Gladstone Regional Council Integrated Water Strategy Water Supply - Bores

Gladstone Regional Council Integrated Water Strategy Water Resources

Gladstone Regional Council Integrated Water Strategy Ground Water Investigations

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council Integrated Water Strategy Comparison of Options

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy Sewerage Treatment and Disposal

Gladstone Regional Council Integrated Water Strategy Wastewater – Lagoon System

Gladstone Regional Council Integrated Water Strategy Wastewater – Disposal Area

Gladstone Regional Council Integrated Water Strategy > Permanent Restriction since Sept > High Water and Wastewater Pricing Key Water Issues

Gladstone Regional Council Integrated Water Strategy > Population Growth in Serviced Area Key Water Issues

Gladstone Regional Council Integrated Water Strategy > Lack of Reliable Water Supply Key Water Issues

Gladstone Regional Council Integrated Water Strategy > Over-commitment of Water Supply Key Water Issues

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy BOD Results Licence limit Key Sewerage Issues – EPA Failure

Gladstone Regional Council Integrated Water Strategy Nitrogen Trend in Run-off Water Storm Water to Deepwater National Park

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council 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. Integrated Water Strategy

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy Membrane Operating Ranges Bacteria Coal dustBeach sand Metal ions Aqueous salts  m (log) Relative Particle Sizes Ultrafiltration Virus Microfiltration Separation Process Effective pore size Nominal pore size CryptosporidiumGiardia

Gladstone Regional Council Integrated Water Strategy Membrane Filtration Air Bacteria Virus Solids Treated effluent Membrane

Gladstone Regional Council Integrated Water Strategy >Conventional Desalination plant – 7.5 ML/d intake pipeline (25,000 ep) – 1.5 ML/d modules Technical Solutions Proposed

Gladstone Regional Council Integrated Water Strategy >Modular MBR Wastewater –600 KL/d with 300 KL/d Membrane Technical Solutions Proposed

Gladstone Regional Council Integrated Water Strategy Technical Solutions - Layout

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy Desalination v’s Pipeline ObjectivePipelineDesalination Cost and Funding Maximise State Funding40% available80% available Minimise Capital Costs$42.3M plus 18 months inflation $24.59M Capital Cost CertaintyCouncil riskFixed Price Operations Operations cost certaintyCouncil riskFixed Price Operations performance certaintyCouncil riskFixed Price Compliance EPA wastewater ComplianceDelay of 18 monthsContract signed Water supply and groundwater contaminationDelay of 18 monthsContract signed Professional & Operations StaffIssue remainsContract Condition

Gladstone Regional Council Integrated Water Strategy > 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

Gladstone Regional Council Integrated Water Strategy 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. ActivityResponsibility DesignUUA ConstructionUUA OperationUUA MaintenanceUUA Asset ReplacementUUA PaymentCouncil LandCouncil Pre-existing Contamination Council ApprovalsJoint

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy >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 Financial Modeling

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy 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

Gladstone Regional Council Integrated Water Strategy >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

Gladstone Regional Council Integrated Water Strategy Queensland Ground Floor 171 George Street Brisbane QLD 4000 Australia t f Victoria Level Queen Street Melbourne VIC 3000 Australia t f