Financial and Commercial Analysis of Nullinga Dam

Background

Nullinga Dam, a proposed bulk water supply infrastructure project on the Atherton Tableland in Far North Queensland, has been under consideration as a potential driver for economic development in the region. This project has been evaluated over the years, with recent analysis conducted under a Detailed Business Case Assessment commissioned by Building Queensland. The primary goal was to assess the financial and commercial feasibility of Nullinga Dam and to inform the Queensland Government on whether to proceed with the project based on its economic sustainability and potential to meet water demand effectively. Building Queensland enlisted NineSquared, drawing on its specialized expertise in financial analysis and water infrastructure projects.

Our role

NineSquared’s role in the Nullinga Dam project involved a thorough financial analysis that incorporated the development of complex Net Present Value (NPV) models over both 30-year and 50-year periods. These models were instrumental in evaluating various dam size and configuration options, allowing for an in-depth look at the long-term financial viability of different structural alternatives.

Using expertise in water infrastructure and regulatory pricing, NineSquared crafted a regulated pricing model to measure the affordability of the dam from both customer and government perspectives. The pricing model not only considered the potential revenue from water sales but also factored in the affordability challenges facing end-users, especially given the high capital costs relative to the volume of new water that the dam would provide.

This affordability analysis uncovered significant financial risks, predominantly due to the considerable initial capital expenditure required for construction, which posed a high threshold for cost recovery through water sales alone. Without substantial government support through capital grants, the dam’s construction costs would place a heavy burden on customers, making it difficult to ensure affordable water prices while maintaining financial feasibility. This finding underscored a critical gap between the project’s capital requirements and potential revenue, illustrating a major challenge for the project’s financial sustainability and affordability.

NineSquared’s work on the Nullinga Dam project underscores its expertise in evaluating large-scale water infrastructure projects, particularly in integrating diverse data inputs, including engineering specifics, into financial models. This rigorous approach provided Building Queensland with a realistic financial outlook for the dam, allowing for an informed decision-making process. By highlighting the affordability challenges and financial risks, NineSquared contributed to a clearer understanding of the project’s feasibility and the necessary conditions for its success.

The comprehensive financial and commercial assessment performed by NineSquared demonstrates its capacity to guide stakeholders through complex infrastructure investment decisions, emphasising realistic expectations around cost, pricing, and potential government funding requirements.