Cost blowouts could put NSW dam projects at risk. 

New South Wales water minister Melinda Pavey has faced questions on planned Wyangala and Dungowan dam upgrades. 

It was revealed that Ms Pavey directed WaterNSW to undertake a final business case after it wanted the project would breach its “head room”, which requires its stay below a statutory debt-to-equity ratio.

There is a $250 million price tag on just the business cases and early works at the dams, which could risk the credit rating of WaterNSW. 

It now wants a guarantee from the NSW Government that it will be reimbursed if the dams do not proceed.

Meanwhile, costs continue to spiral, with biodiversity offsets to compensate for habitat destruction around Wyangala dam on the Lachlan river expected to lead to a cost blow out of up to $1.5 billion, leaving the final cost close to $2.1 billion. It is a massive increase from the original projected cost of $680 million.

The price of the Dungowan dam, to be built on the Peel river, is expected to hit $870 million, up from the initial estimate of $484 million, according to the Productivity Commission.

Ms Pavey has criticised this analysis., accusing the authority of “not understanding the water cycle in the Peel Valley”.

“The real benefit is that there will be more stored water going into dry periods,” she said.

She says that buying water off farmers, as the Productivity Commission suggested, would affect downstream jobs in meat processing.

Greens MP Cate Faehrmann, who chaired an inquiry into the government’s dams project, says Ms Pavey has not given straight answers.

“The minister issued a direction to WaterNSW, claiming exceptional circumstances, to ‘deliver business cases, pre-construction activities and an early works package’ for raising the Wyangala Dam Wall and building new Dungowan and Mole River Dams,” Ms Faehrmann said.

“Yet, today she would not give an assurance that the government would reimburse WaterNSW for all sunken costs relating to this directive should the dams not be built.

“No evidence has been provided that these dams will increase water security, yet despite this the minister is directing WaterNSW to do something that puts its investment credit rating at risk.”