Victorian desalination project background

In June 2007, Victoria was in the grip of the Millennium Drought. Melbourne’s water storages were at 29% and reservoirs had fallen by 20% over the previous 12 months. Stage 3a water restrictions had not stopped the decline in water storage levels and the gap between supply and need for water over the previous year was about 250 GL.

On 19 June 2007, the Victorian Government announced the desalination project after Melbourne Water completed a feasibility study.

On 30 July 2009, the Victorian Government awarded AquaSure the project contract. Aquasure would finance, build, maintain and operate the project for 30 years with a fixed price of $3.5 billion. The project included a desalination plant capable of delivering 150 gigalitres per year when operating at full capacity (expandable to 200 gigalitres/year) and a transfer pipeline connecting the plant to the existing Melbourne and regional water supply systems.

On 30 November 2012, Commercial Acceptance of the project was achieved. At that time, the plant proved that it could produce high-quality drinking water at full capacity.

To achieve Reliability Testing Finalisation (the final commissioning test), the plant was required to operate at full capacity for 30 days to test the reliability of all systems.

Located in Wonthaggi, the plant was fully commissioned on 17 December 2012. It is now fully operational.

The plant can supply up to 150 billion litres of water each year and is connected to Melbourne Water, South Gippsland Water and Westernport Water’s supply systems. Read the desalination project timeline.

Pipelines and power supply

The desalinated water is delivered to a system of catchments across Victoria. Water authorities deliver this water to households in:

• Melbourne and Geelong
• South Gippsland and Bass Coast
• Western Port areas.

An 84 km underground pipeline connects the plant and transfer main at Berwick. The transfer main then pumps water into Cardinia Reservoir. Silvan Reservoir can also receive desalinated water.

Local water authorities get desalinated water via offtake points along the pipeline. The pipeline is two-way, so local water authorities also have access to Melbourne water storages for the first time.

An 87 km underground power supply is co-located in the same easement with the pipeline. All the power used for the plant and pipeline is offset through renewable energy credits. These credits are sourced by AquaSure through AGL. Fibre optic cables are also installed with the power supply and pipeline. These help monitor activity and operations across the plant, pipelines and power supply.

Connecting the plant to power and water grids.

Other initiatives included:

• a $12m upgrade of key roads and intersections in Wonthaggi. This included the site access roads and the highway connections
• an 11 km pipeline connecting Wonthaggi, Inverloch and Cape Patterson to the plant at a cost of $5 million. It has the capacity to carry up to 10 million litres of water a day to South Gippsland Water
• facilities upgrades at the Lang Lang Showgrounds
• upgrades at recreation reserves at Koo Wee Rup, Glen Forbes and Grantville.

How we maintain pipelines and use renewable energy

Delivered with a private-public partnership (PPP)

The Government committed to a single Public Private Partnership (PPP) package for the whole project. A comprehensive tender process commenced in June 2008.

PPPs are service-based contracts where the private sector invests its capital in public assets. In return, governments make payments for the delivered assets and the services provided.

The Victorian Desalination Project was significant given the difficult economic conditions. At the height of the 2008 Global Financial Crisis, the project’s scale and complexity made it one of the largest PPP projects worldwide. The project faced adverse weather conditions and a changed industrial relations landscape. The main project parties included DEECA, Aquasure and Davis Langdon with MWH.

Department of Energy, Environment, and Climate Action (DEECA)

DEECA's work ensured the plant, pipeline, and power supply design met expectations around:

• community needs
• environmental management requirements
• the use of leading global technologies
• contractual requirements.

DEECA is now managing the operations and maintenance phase of the 30-year contract with AquaSure. DEECA also manages the contract with the Independent Reviewer and Environmental Auditor (IREA).

AquaSure

AquaSure has 2 major contracting entities:

• Design and construction by Thiess Degrémont Joint Venture
• Operations and maintenance by Watersure (formerly the Degrémont Thiess Services Joint Venture)

AECOM

Davis Langdon partnered with MWH and was named the project's Independent Reviewer and Environmental Auditor (IREA). In 2010 AECOM acquired Davis Langdon and assumed the role of the IREA. They oversee compliance with the performance requirements outlined in the Environmental Effects Statement. AECOM is a leading multinational infrastructure consulting firm.

Financing the project

AquaSure funded the cost of building the plant, pipeline, and power supply, with the capital cost to build the project being $3.5 billion. They also funded the ongoing operation and maintenance costs to 2039. These costs are paid back to AquaSure over the 30-year contract period.

In the case of the Victorian Desalination Project, payments are made in 2 key components:

• water security payments, which cover the desalination plant construction and maintenance
• water usage payments which reflect the changing costs of producing water when it’s ordered.

The water security payment is conditional on AquaSure’s:

• ability to demonstrate that the project could respond to supplying a water order
• capability to deliver on the water order's required quantity and quality.

The water usage payment is made only if water is ordered and delivered. Both the water security and the water usage payments are at risk if there is a failure to perform to the required standards.

This payment structure means we only pay for water if we need it. It limits costs for the Victorian government and water customers. Plus, the cost of construction and maintenance costs are limited when water isn’t needed.

Creating jobs for Victorians

The project provided many job opportunities and boosted Victoria’s regional economies.

During construction:

• About 10,500 people worked on the project. The workforce peaking at around 4,500 at one point.
• Direct and indirect jobs creation through on-site jobs contracts
• More than 18 million man-hours with no serious injury, a testament to the project’s safety standards

There are about 80 full-time equivalent jobs involved in operating the plant. Plus, there are extra contract positions that support operations, maintenance and servicing.

Buying in Victoria

The project awarded about $1.2 billion worth of contracts during construction. Two-thirds were awarded to Victorian companies and about three-quarters to Australian companies.

Victorian and Australian companies supplied:

• 100% of the civil component on the plant site
• 50% of both the mechanical and electrical components
• On the pipeline, more than 90% of the civil, mechanical and electrical components

Contracts that went to Victorian companies included:

• $150 million pipe manufacturing contract to Tyco Water
• $43 million power cable manufacturing contract to Olex
• $17 million to OneSteel to supply structural and reinforcing steel$7 million to Page Steel to fabricate and install structural steel on the plant site.

Jobs and sub-contracts went to local and regional people. Businesses from Wonthaggi, Bendigo, Dandenong, and other regional areas also won contracts.

The flow on effect was not restricted to the local area. Victorian businesses that won contracts to provide goods and services to the project hired many new people.

Boosting the local economy

The local economy enjoyed a significant boost through flow-on demand from a new workforce. These flow-on benefits for housing demand, products from local suppliers and extra business for retailers and service providers. Local people were employed wherever possible.

Listening to local communities

The information communities provided helped to form the EES. In turn, the performance requirements that guided the project directly responded to the community's needs. This resulted in its state-of-the-art design and environmental management processes.

For example, the community expressed concerns about how the plant would look in the coastal environment. In response, the Victorian government set strict requirements on building design.

AquaSure’s innovative plant design blended low-profile buildings into the landscape. They included a living green roof and rehabilitated the coastal dune and wetlands environments.

New community recreation trails meant the renewed coastline created greater local amenities.

Watersure, the plant operator, continues to work with the project's neighbours, local communities and key stakeholders.

Community benefits

Many benefits flow from building the desalination project and guaranteed water supply:

• Secure local water - South Gippsland Water and Westernport Water now have a connection to Melbourne water systems and desalinated water when required
• Road upgrades - The EES identified road improvements for better traffic management.
• Restore ecosystems - Degraded farmland was regenerated with millions of native plants and trees across coastal, marine and estuarial environments.
• Public amenity - 8 kilometres of recreational trails for pedestrians, cyclists and horse riders, picnic and BBQ shelters, boardwalks, information points and a bird hide.

The Victorian Government committed $12 million to upgrade roads, reconstruct car parks and build roundabouts in the Wonthaggi area. These works went beyond that and included improvements to Webb Road, West Area Road and Graham Street.

Page last updated: 08/09/23