1. Prof. Mike Young Research Chair, Water Economics and Management The University of Adelaide Berri, 5 th November 2008 Buying water

2. 2 Where are the water entitlements?

3. 3 All sums should be in Cap equivalents Entitlement TypeCap Factor New South Wales – Murray Murray High Security0.95 Murray General Security0.82 Murray Supplementary License0.00 New South Wales – Murrumbidgee Murrumbidgee High Security1.00 Murrumbidgee General Security0.70 Murrumbidgee Supplementary License0.00 Victoria – Murray Murray High Security (Water Right or License)0.95 Murray Infrastructure Savings1.00 Murray District Security (Water Right & Sales)1.18 Murray PD Security (License & Sales)1.12 Murray Unregulated flow0.00 Victoria – Goulburn/Loddon/Campaspe Goulburn High Security (Private Diverter)0.95 Goulburn Infrastructure Savings1.00 Goulburn District Security (Water Right & Sales)1.30 Goulburn PD Security (License & Sales)1.18 South Australia Country Towns1.00 Irrigation (Highland and Swamps)0.91 Infrastructure Improvements1.00 Australian Capital Territory ACT Unregulated1.00

4. 4 How much will $3.1 b buy? A cap equivalent costs $3,000 / ML Discount $3.1 b over 10 years to current market value at 10%  $1.8 b  $1,800,000,000/3,000 = 600 GL Add Living Murray 500 GL of below cap Add Infrastructure savings 500GL of below cap

5. 5 Volume of Water in the System How much water is needed? 1,500 GL is 19% of the Cap in the Southern System

6. 6 Current process How fast should the process be?  Currently planned to take 10 years  $50m is first 1/60 th of the total Issues $150,000 exit payments available in states without a 4% cap and presumably a 10% cap Capital gains tax may be payable Impact on communities

7. 7 Off-market share buybacks Corporate experience reveals that large buybacks are best implemented using off-market mechanisms. Coles Myer has provided one of the better known examples.

8. 8 Coles-Myer Share Buyback Schedule

9. 9 Coles Myer “2005” Press Release Off-market buy-back price $8.30 (All who offered $8.30 or below per share were paid $8.30) 70.4 million shares bought back for a total of $585m Secured 5.7% of Coles Myer shares on issue

10. 10 Indicative structure of water buyback tender 1.Invited to sell a proportion or all of your water licence with lease back until 30 th June 2011. Advised that the price will be above market value. (No change over the next two irrigation seasons). 2.Tender closes on 30 December, notified 2 weeks later on January 15 th. 3.Each licence type, paid the same clearing price two weeks later on 30 th January. 4.Entitlements may be leased back for next two irrigation seasons at $300 per ML of allocation received. 5.This year’s allocation remains with licence holder.

11. 11 Illustrative Offer form (High security entitlement) Type of Licence South Australian River Murray Licence Offer 1 …………….. ML @ not less than $2,400.00 per ML Offer 2 …………….. ML @ not less than $2,700.00 per ML Offer 3 …………….. ML @ not less than $3,000.00 per ML Offer 4 …………….. ML @ not less than $3,300.00 per ML Offer 5 …………….. ML @ not less than $3,400.00 per ML Signatures Licence holder ………………………………………… Registered interest (if any) ………………………….. Will you be leasing back any allocations made to these entitlements at $300 per ML of allocation made until 30 June 2011? Yes / No

12. 12 Choices Continue with the status quo Move much more quickly Free up market totally Develop a community proposal for a rapid buyback  Coles Myer-like process  Nominated price