A massive increase in the cost of water in Tasmania may force Simplot to close its Devonport factory.

In June, Simplot warned both its Australian factories were under review because of rising costs of production and falling profits.

Now its Chief Executive has revealed the cost of running its Devonport factory is about to rise significantly because of a water bill price hike.

Terry O'Brien told Landline the company has been advised its annual bill of $800,000 could increase by two million dollars to about 2.8 million dollars.

"I can tell you, you have to sell a lot of green peas to make that two million dollars," he said.

The Devonport factory employs 300 people.

Simplot is due to take a decision on the viability of its Australian factories to its US owners next week.

A State Government spokesman says it has been working closely with Simplot after the announcement of a review of its Devonport operation.