1) Yes, I would assume the long term IRR to be around 6% of NAV....

1) Yes, I would assume the long term IRR to be around 6% of NAV. Naturally if NAV rises, the historical yield of 6% IRR would also rise in dollar terms.

I think there are significant tailwinds to push the NAV higher though in the long term, including, but not necessarily limited to: no new entitlements being created, government buy back of current entitlements, climate change with long term (20 years) trend showing drier and hotter conditions, and rotation of farmers into higher dollar yield crops that require increasing irrigation requirements.

2) Hard to quantify meaningfully. Despite the spike in water prices recently, the SP here has been lackluster with current level sitting around December/Feb levels. The current 20% discount of SP to NAV (before tax) of 1.72 seems like reasonable protection, at least for the next 12 months, given current water storage levels and spring just around the corner.

I consider this to be quite a defensive play, and hence I don't expect huge discounts (eg of 50%) to NAV to become available, though naturally one never knows what Mrs Market will do next.

3) Even harder to quantify. Ultimately, the government can do what it likes. However, the financial model here is based on ownership, which has extremely strong foundations in democratic, capitalist societies such as Australia, and hence difficult to upheave. Furthermore, D2O is a small player, by capacity at less than 1% of available entitlements, and hence can hardly be portrayed as a greedy market maker by the government authorities (unlike, for example the banks).