Construction began in 1902, with Peat Island being cleared and levelled. Several buildings were erected, including the two storey brick edifices that still dominate the island, and a hexagonal sewing room. In order to provide fresh water to both Peat and Milson Islands, a high concrete dam holding 7,000,000 gallons was constructed in a gully on the northern bank of the Hawkesbury River, a few kilometres upstream, and above the cliffs behind the wreck of HMAS Parramatta. Rock and sand for the dam were obtained on site, but cement and other materials had to be hauled up the cliff face from the river using old Sydney tram cables. The only access to the reservoir was via a series of five, near vertical timber and iron ladders that were pinned into the face of the cliff adjacent to the waterfall. A pipeline ran from the reservoir and serviced both islands via underwater mains.