Macquarie at Beaconsfield, Peter Beattie and Babcock controls media coverage

4. Did Macquarie do everything it could at Beaconsfield?




By Stephen Mayne

Michael Ryan, the Macquarie Bank-appointed administrator of Allstate Exploration, operator of the Beaconsfield goldmine in Tasmania, has hired crisis manager Anthony McClellan to help him get through the tragedy of the rock fall which appears to have killed three miners.

The mainstream media has so far largely steered clear of the angle that the mine has been mired in controversy and litigation, but Macquarie Bank is now sure to face further questions about one of the world's richest companies still in administration.

The Australian's Michael West won the business Walkley last year for his reporting on Macquarie Bank's dealings at Beaconsfield but the paper is also facing an aggressive defamation action from the Millionaire Factory which certainly hasn't enjoyed the attention during what has been quite a media campaign.

Macquarie originally lent $21 million to Allstate and after appointing Michael Ryan as administrator, it bought $77 million of inter-company loans for just $300,000. Suddenly the mine turned around, the gold price spiked and Allstate was swimming in cash but will remain in administration until Macquarie has collected its entire $77 million.

So far it has recovered about $35 million, including the full $21 million original loan, so the next $65 million or so will be pure profit. Allstate owns 51% of the mine and is the operator so Michael Ryan is the man ultimately responsible, which explains why he's taken on McClellan, whose column in The Australian's Media section today is headlined "You must remember this: if it's a rumour, give it a miss".

McClellan is taking aim at Glenn Milne's appalling column speculating about Kim Beazley's health but he's no doubt going to have to deal with plenty of speculation as to whether Macquarie Bank, which has two executives on the joint venture committee and clearly controls the Beaconsfield operation through Ryan, could have done more.

For instance, check out the announcement Allstate made on 29 December last year under the headline "Geotechnical & Mining Method Review". This review was undertaken following a "large seismic event," which occurred on 26 October last year, and "highlighted work to be done throughout the mine, with a recommendation for increased levels of ground support in certain areas".

Clearly, the full report will need to be publicly released to assess whether Macquarie implemented all the recommendations made by AMC, one of the leading geophysicist advisors around. One of the Macquarie Bank executives on the joint venture committee, Warwick Morrris, is a geophysicist himself, so he'll no doubt be briefing his bosses at the bank about what it all means.

So far, the idea of a tremor causing a rock fall leaves Macquarie looking blameless – how do you prepare for a minor earthquake? However, if the report made recommendations which were not followed – and we hear this practice called checkerboarding is a key issue – then things might start to get uncomfortable for the Millionaire Factory on something that was proving to be close to the biggest bonanza they've ever enjoyed.



7. Peter Beattie's smart asset shuffle




By Stephen Mayne

Ever since the early days of Joh Bjelke-Petersen's premiership, Queensland has been Australia's richest state when it comes to public finances. There was no need for a Kennett-style $30 billion energy sell-off in the mid-1990s, there was no collapse of the Queensland State Bank and public sector superannuation has always been fully funded. This has allowed Queensland to easily claim the title of Australia's "lowest taxing state", a fact which is best demonstrated by the absence of any state-based fuel tax – something no other state or territory can sustain.

The power of Queensland Inc's balance sheet was demonstrated when the government-owned Port of Brisbane Authority snapped up almost 40% of Brisbane Airport from the Federal Government in 1996-97.

Even more eyebrows were raised when Queensland Rail last month splashed $446 million on the "above rail" operations of WA-based ARG and Ergon Energy spent $103 million buying Melbourne-based listed electricity retailer Australian Energy. Observers noted that Ergon wanted Australian Energy's six years of operating experience in competitive markets as full retail competition approached on its home turf next year.

When all this talk suddenly emerged after the Toll-Patrick peace deal of Queensland Rail also spending up to $1 billion buying Linfox, FCL or even 50% of Pacific National, questions started to be asked about the broader game plan and where the money would come from. Now we might just have some answers. Australian Energy was clearly bought to make Ergon and Energex more saleable propositions. Could the same occur with Queensland Rail once it completes its plans to expand nationally?

From a Queensland budget point of view, the estimated $1 billion from the sale of Ergon and Energex could be injected straight into Queensland Rail. The timing of the deal is excellent given the buoyant market for energy assets. Maybe even Snowy Hydro could be considered as a potential buyer if the vendor governments leave it with a strong enough balance sheet.

The Victorian Government leapt through a unique window of opportunity in securing $30 billion for its energy assets between 1994 and 1999 – namely the US was deregulating and most of their giant power utilities wanted to experience Victoria's world leading competitive market model in readiness for the same process at home.

The Kennett Government just happened to find the two right blokes – Dr Peter Troughton to break up the industry and investment banker John Wylie to run the global auctions of about 15 different businesses over a four-year period – at exactly the right time.

However, many of the new owners of these very same assets – Origin, AGL, CKI, Singapore Power and the like – are now the most likely buyers of Ergon and Energex. The Beattie Government could easily have opted for the populist public float option, but perhaps they learnt a lesson when the Queensland TAB was floated for $2 a share in 1999 but now trades as Unitab and closed at $14.82 yesterday.

Markets need to become comfortable with business models before floats can really deliver great value – something the Kennett Government learnt the hard way in fetching just $2.25-a-share in the 1994 Tabcorp float. In hindsight, Kennett should have instead just floated a minority stake and flogged the rest for a much higher price a few years later once the market better understood its operations and after some rationalisation of the state-based totes.

A similar argument might just apply to Snowy Hydro given that analysts are still coming to grips with the notion of more than half its revenue coming from seemingly bizarre insurance policies that rely on the company not starting its generators. Energy retailing is now much better understood by investors but Beattie is clearly out to maximise the proceeds by welcoming foreign bidders as well.



18. How Babcock minimised media coverage of record pay packets




By Stephen Mayne, occasionally over-zealous media critic

There's nothing worse in this game than to make a mistake when sledging the media for missing a yarn or getting things wrong. That's why Media Watch has to be as close to mistake-free as possible, because they'll cop a real hiding if any blunder of their own surfaces.

Another common media occurrence is the old make-good story where you essentially correct the record but attempt to dress it up as a separate news story or a development on what you previously argued. This item is an example of both these trends.

Firstly, I was wrong on Monday in saying the Babcock & Brown annual report was out that morning, when in fact it had been lodged with the ASX at 12.54pm on Friday afternoon. The square-up item yesterday then went further in attacking the mainstream media for missing the story of Babcock's soaring executive pay packets for three days until we ran with it.

However, this was wrong because all the pay details were actually made public when Babcock released its 190-page full financial report on 30 March. The press and analysts were invited to briefings when the full-year result was released on 23 February and it generated plenty of excitement, but there was no fanfare surrounding the 30 March release and the pay detail was duly missed by all the mainstream media, although The AFR did manage a six sentence brief on page ten which started as follows but covered no other executives:

Babcock & Brown chief executive Phil Green has entrenched his status as one of the country's highest-paid executives, earning more than $12 million last year for steering the fast-growing investment house through its first year as a listed company. Mr Green enjoyed an 18% pay rise after the investment house posted a near doubling of annual profit to $251.6 million.

This process is highly unusual because most companies simply announce their profit result and then the pay details are released in the annual report a few weeks later along with the notice of meeting for the AGM, which reveals any new equity issues and pay rises for non-executive directors. The Babcock strategy of introducing a third disclosure date certainly worked a treat if the idea was to minimise press comment on their record pay packets. Presumably hacks who saw the 30 March release just assumed it was a repeat of the profit information, when in fact it contained some great stories on executive pay.

Therefore, my attack yesterday still stands in the sense that the media as a whole failed to report the Babcock pay details in a comparable way to the treatment Macquarie Bank copped last year, despite the fact that they are comparable companies – we are talking about the two highest paying listed companies in Australia. However, I'm still a goose for claiming on Monday that something was fresh news that morning, when in fact the document I was relying on was made public three days earlier and the information that I claimed was newsworthy in that document had actually been released seven weeks before.

The fact that , and all produced follow-ups to our Monday story is a tacit admission that it was a good yarn that they'd missed. However, I was slack for missing it too and it would have been better to simply get all the facts right from the outset.

But presumably Babcock was happy with how things panned out. The information in the annual report was largely in place on 30 March yet it wasn't released in the annual report until last Friday afternoon – the Friday before the ANZAC Day long weekend and also the last Friday available in order to have the AGM on the last Friday available, namely Friday 26 May. We all know that Friday is the best day to release bad news because newspapers have early deadlines, the news pages are squeezed by all those supplements and there are no Saturday shock jocks to beat you around the ears.

It worked a treat for Babcock and it will be interesting to see how the equally unusual Macquarie strategy of releasing all the pay figures in the annual profit announcement goes. That will occur on 18 May – the very day that BRW's 2006 Rich List goes public. BRW has never included a Macquarie or Babcock banker but we estimate that about a dozen of them are worth more than last year's $110 million cut-off, so it will be very interesting to see how they go this year given the soaring pay packets and share prices over the past 12 months.



19. Sky News – channel of the year and blundering amateurs




By Stephen Mayne, triple Foxtel digital subscriber who pays for lots of extra channels

There wouldn't be many Australian homes who support Foxtel as enthusiastically as the Maynes and we're pretty happy with the service. The better half enjoys old episodes of Sex in The City, the kids would happily watch Nick Junior all day and I like the music channels plus the generally excellent offering on Sky News.

And with Foxtel finally breaking into profit after ten years of losses, you couldn't blame the pay-TV players for yesterday patting themselves on the back at one of those "glittering award nights" held for the industry at Fox Studios. Claudia Karvan was voted the most popular female character for her role in Love My Way on Fox 8, Lifestyle's Brendan Moore got gonged and Sky News received three awards, including "channel of the year". However, in one of those unfortunate juxtapositions, a disaster was unfolding on the "channel of the year" just as the awards were getting into full swing.

It has now been more than a year since David Koch and Michael Pascoe were booted out of Sky Business Report, the nightly half hour program which goes to air at 8.30pm and is repeated at 11.30pm. The two veterans were initially replaced by 21-year-old Brooke Forster, but then Karen Tso was parachuted into the chair as part of a re-launch that saw the program produced in conjunction with The Australian.

Given what went to air last night, Karen must be wishing she was still doing the finance updates for Tony Jones on Lateline. For starters, the autocue obviously wasn't working because Karen was constantly looking down at a piece of paper as she introduced the program. Then there were a couple of brief glitches with the sound and picture, but it got worse when a story on oil prices featured a long grab from Peter Costello with no sound.

Karen advised at the outset that a detailed interview with AGL CEO Paul Anthony was coming up later in the program so I stuck around out of interest to hear his Welsh accent and learn more about yesterday's peace deal with Alinta. Sadly, Karen introduced the interview and once again we got a silent picture of a man talking. After about 30 seconds Karen came back and apologised for the technical glitch and went to what was obviously a filler story about Sydney Fashion Week but that also had no sound.

The program usually finishes with a summary of the headlines in The Australian's business section the next day but when Karen bid farewell to her 10,000-plus viewers prematurely at 8.50pm we only had them read out rather than displayed.

So how do you fill ten minutes of live news coverage? Sky first opted for a house ad plugging The Australian. The catch-line was: "Are you an informed Australian?" Certainly not after watching last night's Sky Business Report.

The last five minutes of the program were filled with an interview by sports reporter Craig Norenbergs with Kyle Patterson about his not-so-new book Football for Dummies. Has anyone ever produced a book called Live TV for Dummies? Maybe it was just a case of everyone being on the booze at Fox Studios. Thankfully the repeat of the program at 11.30pm fixed up most of the blunders but only really sad cases like me would have stayed up to find out.



25. Annual reports go voluntary – sell PMP




By Stephen Mayne

The Federal Government yesterday announced a controversial move: making the distribution of annual reports by listed companies voluntary. The change will probably save almost $100 million a year spread across the 1,600-plus listed companies and the two biggest losers will be PMP, Australia's biggest printing company, and the government itself through Australia Post.

At the moment, companies must send out hard copies of the annual report unless a shareholder expressly asks not to receive it. Now the default option will be not sending it unless you inform the company you want it.

As the holder of Australia's biggest small portfolio – 100 different stocks worth $69,768 after the partial sale of eight small stakes yesterday – at one level, I should be outraged that the annual reports won't automatically be sent out. However, my experience is proof positive of the enormous environmental waste because our PO Box regularly overflows with company missives that usually just get binned.

News Ltd's Terry McCrann was on the money in lauding the move today as "one small step for mankind, one huge win for trees". However, there's a certain irony about McCrann's criticism of laws that still require companies "to waste millions putting meaningless rubbish in their annual reports" and then spend even more sending them to an overwhelming majority of shareholders who turf them "straight in the bin".

So what would be the next obvious move to save trees? How about cutting back on all those meaningless supplements that pad out newspapers these days? And what about giving residents the choice of opting not to receive Rupert's suburban give-aways across the nation? Many people never look at the local paper but in Victoria, alone Rupert's Leader Newspapers group dumps 1.43 million in letterboxes without permission every week.

Finally, let's hope this change stops the practice of struggling companies forcing small shareholders to sell up against their wishes as a cost-saving measure. An ERG shareholder explains:

Have you seen ERG's latest? I had a letter today telling me that small shareholders are costing it a lot of money in administration, therefore they are invoking rule 5.5 of their constitution which empowers them to sell up these shares no doubt at current prices. In my case this means that my initial outlay of over $4,000 (with no interim dividends) is now worth less than half through their bad organisation and they are about to rip me off of any chance to make a profit if they come good. I think it is outrageous.

Indeed. David Koch's old outfit Palamedia is still yet to do this to me even though the original $200 investment is now down to just $2. Still, it's interesting to read the annual report each year.

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