Duxton Water responds to media accusations

Duxton Water Ltd (ASX: D2O) share price remains relatively flat after releasing a statement in response to an article in The Australian regarding water hoarding.

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Duxton Water Ltd (ASX: D2O) released a statement to the market this morning in response to an article in The Australian regarding water hoarding.

What did The Australian report?

The article published by The Australian yesterday alleges that non-landowning water investors are hoarding water supplies causing a massive, artificial price spike. The allegations come on the back of many horticulture and farming representatives writing to Water Resources Minister David Littlepproud.

According to the article, affected parties claim that non-farm investors are playing the market by holding supply and driving the price of irrigation water from a long-term average of $135/megalitre to more than $800. As a result, agricultural groups are calling for a temporary ban on non-landowning investors from buying irrigation water.

The article goes on to directly raise concerns over Duxton Water as a non-farming entity that has water rights worth $256 million and controls over 74 billion litres of water. Agricultural groups claim that Duxton has purchased and 'carried over' more water rights in comparison to their annual consumptive use, driving up the price of irrigation water.

How have Duxton responded?

Earlier today, Duxton Water issued a response to the market refuting the claims raised in media reports. In the announcement Duxton states that the company is not a speculator, rather a long-term investor of Australian permanent water entitlements. As a result, the company reiterates that their purpose is to build a portfolio and lease flexible water supply solutions to farmers.

Duxton stated that as at 31 August 2019, 79% of the company's high security entitlements were leased to farming partners. In response to 'carrying over' unused water from one year to the next, Duxton states that the company is operating within the rules that govern entitlement holders.

Duxton refuted any claims of hoarding water holdings. The company stated that it currently holds approximately 75,150 megalitres, which equates to less than 1% of entitlements on issue. Furthermore, Duxton states that 53% of the company's total entitlements are from a lower tier that have little to no water allocations due to continued dry conditions.

In the announcement, Duxton claims that large-scale permanent crop developments have changed the dynamic of the Australian water market. In addition, according to the company, persistent dry conditions and the removal of 20–23% of permanent water entitlements by the government has placed further supply constraints on the market.

The Duxton share price is trading relatively flat in morning trade, up nearly 2% at $1.325.  

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended DUXTON FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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