Growth Farms Australia managed two Queensland properties under difficult circumstances until at least 2010, before the government bought their water rights

Another layer has been added to the convoluted story of Angus Taylor’s involvement in the two cotton farms that sold water to the federal government in a contentious $80m deal in 2017, shedding light on the farms’ difficult circumstances before the sale.

Growth Farms Australia, a company in which the energy minister holds an interest, was the agricultural manager of the two farms for several years until 2014, sources have told Guardian Australia.

It came to run the properties – Kia Ora and Clyde – as the result of an investment scheme that promised to make millions through tradable water rights – but which looked as though it might go horribly wrong until the federal government stepped in to buy its rights.

Taylor has said he played no role in the 2017 water sale and was not aware of it until it was announced. He has said that neither he nor his family benefited from the water transaction. There is nothing to suggest that is untrue.

The Angus Taylor story: from the Liberals' golden boy to a man on the edge Read more

A hard slog

The story of the water sale begins in 2007, when Taylor, then a management consultant, teamed up with a lawyer-turned-dealmaker from New Zealand, Connor Maloney.

In his parliamentary biography, Taylor describes himself as a co-founder of Eastern Australia Irrigation and, for a year in 2008 and 2009, a director of its subsidiary, Eastern Australia Agriculture, which owned two large cotton farms – Kia Ora and Clyde in Queensland, just south of the giant Cubbie Station.

A group of investors were brought together, including UK company EF Realisation Fund and Pacific Alliance Group – whose chief investment officer, Chris Gradel, was a rowing buddy of Taylor’s from Oxford.

This was an investment for those with deep pockets looking for exposure to agriculture and the potential to make big profits when the Australian government established a trading scheme in water as part of the Murray-Darling Basin Plan.

Their interests were held through the Caymans parent, Eastern Australia Irrigation. Taylor was a director of that company until at least the financial year 2012-13. But because the Caymans does not make company records public, its impossible to confirm Taylor’s statement that he resigned before entering parliament.

Soon after Eastern Australia Agriculture bought the farms, the management was taken over by Growth Farms, a company established by the Taylor family, and which offers agricultural management services, often for foreign investors.

Growth Farms was responsible for hiring key personnel for Kia Ora and Clyde. For a while Geoff Daniel, a director of Growth Farms, was the key manager of the farms. Taylor’s former McKinsey and Co colleague Tony Reid, who remains a director and shareholder of Growth Farms, was also a regular at the properties and made it his business to understand the water entitlements, insiders said.

Taylor’s brother Richard was chairman until 2015. In a 2015 media report Angus Taylor was described as a passive shareholder and he declares an interest in Growth Farms on his pecuniary interest register.

But for Growth Farms, the cotton farms proved a challenge. They had been run down before Growth Farms stepped in and hired farm managers to turn them around.

It was a hard slog, especially for the Growth Farm executives who were used to managing grazing land but who now found themselves attempting to run two giant irrigated properties that relied on complex infrastructure such as levies and storages to manage overland flows.

Unluckily for the investors, the millennium drought was followed by record breaking floods. The Condamine-Balonne valley had four floods in two years between 2010 and 2012. Nearby St George had to be evacuated twice.

The two farms were inundated and some of the cotton crop lost.

Then followed another drought. The farms were forced to plough some of the crop back in as water in the storages ran short, insiders told the Guardian.

Eastern Australia Agriculture accounts give an insight into the problems faced by the Growth Farm managers. Although the accounts are complicated by inter-company loans, the 2016-17 annual report for the Australian company shows accumulated losses of $41m.

Frustration at failure to sell

The plan to sell water rights foundered as well.

According to bureaucrats answering questions on notice, Angus Taylor approached them in 2008 offering to sell some of Eastern Australia Agriculture’s water entitlements, but the government rejected the offer. Another approach from the company in 2014 was also unsuccessful.

The details of why the commonwealth rejected the offers has not been made public.

Meanwhile Maloney and the investors were getting increasingly agitated. The investors had been promised a five- to seven-year horizon and now it was proving difficult to realise any gains.

“It was like swimming with sharks,” said one of the former managers. Another described the investors as trying to micromanage the properties and refusing to follow their advice on much-needed investment.

Maloney and the managers of the properties clashed. Daniels left, the on-farm managers were made redundant and asked to leave with short notice, and by late 2014 the contract with Growth Farms had ended. Taylor says Growth Farms’ management agreement ended earlier in 2010.

By now investors were most unhappy.

The farms had been put on the market in 2013, and again in 2015, with different agents. They did not sell.

What happened next is still a little unclear, despite numerous requests for documents through freedom of information laws and through Senate calls for production of papers.

But discussions about the federal government buying Eastern Australia Agriculture’s water sprang back to life in late 2015.

The idea was discussed with the environment minister, Greg Hunt, but before he could decide, the water portfolio was given to then Nationals leader Barnaby Joyce.

What emerged was a deal extremely favourable to Eastern Australia Agriculture.

Growth Farms had stopped managing the properties at least three years before the water was sold in 2017. But one key figure and a director of Growth Farms, Reid, remained involved and played a key role in the water sale.

Reid says he acted independently of Growth Farms, did the work on the sale as an independent consultant and was paid separately from Growth Farms.

The current managing director of Growth Farms, David Sackett, confirmed that Reid did the work independent of the firm in which the Taylors have interests.

“We weren’t at all involved in the sale of the water,” Sackett said.

Taylor also said it was his understanding that Growth Farms ended its contract with Eastern Australia Agriculture some years before the water sale.