Snowy float, QLD economy, pokies, sporting MP's
March 23, 2010
Here are Stephen Mayne's five stories from the Crikey edition on Tuesday, 6 June, 2006.
2. The Treasury Secretary who botched the Snowy float
By Stephen Mayne
There's been an enormous amount of speculation about what went wrong with the Snowy Hydro float but Crikey has some new insights that put a fresh perspective on the situation. It seems the person most responsible for the stuff-up is NSW Treasury Secretary John Pearce, a highly risk-averse bureaucrat who ran the process with an iron fist and focused almost exclusively on ensuring taxpayers didn't get ripped off financially.
For Pearce, the most important part of the process was getting the 2006-07 forecasts for EBITDA (earnings before interest, tax, depreciation and amortisation) right so that the three government shareholders received a full price for their asset. To that end, Crikey can reveal that the EBITDA forecasts in the draft prospectus, including a restatement of past figures, were as follows:
2004-05: $261mWith earnings forecast to rise, the governments were hoping to collect between $2.25 billion and $2.5 billion for the equity, but when you add in Snowy Hydro's $950 million debt (up from $600 million as at June 30, 2005), this would have delivered an enterprise value of between $3.2 billion and $3.45 billion.
2005-06: $275m
2006-07: $315m
We hear that Snowy Hydro actually has a very strong management team, mainly because each of the three government shareholders has only a one-third voting interest so none has been able to meddle in its affairs.
However, Pearce, rather than Snowy Hydro's management or advisers, was filtering all the information flows back to Ministers and there was a directive that no-one was allowed to talk, which meant that everyone from Craig Ingram to Bill Heffernan was unable to find out any detail about the process.
NSW Finance Minister John Della Bosca belatedly went down to debate the sale with farmers, but this was too little too late from a government that didn't really care because no irrigators vote Labor.
Both Victoria and the Commonwealth delegated management of the float to NSW but even this process was botched because the three joint lead managers – UBS, Macquarie Bank and Goldman Sachs-JB Were – weren't even going to help run the institutional book build process. This was going to be the sole domain of CS First Boston, the government's advisor on the IPO.
The process was also way too slow, especially key decisions such as the board restructure which was announced on 15 May – a full three months after Victoria and the Commonwealth signed up for the sale. It is unlikely that new chairman Rich Holliday-Smith, the doyen who helped build up SFE Corp, will bother to stick around answering to disingenuous government shareholders.
3. Why Queensland will become our biggest state economy
By Stephen Mayne
It's budget day in NSW and Queensland and the contrast between Australia's highest and lowest taxing and spending states will be stark indeed. Comparing state public sector finances has never been a strong feature of Australian politics, mainly because of weak public accounting standards, a lack of independent analysis like you get with listed companies, and our parochial state-based media.
It's what explains comments such as these from News Ltd's Terry McCrann last week praising John Brumby's Victorian budget:
It's competitively clever, making Victoria a cheaper place for employment than both NSW and Queensland at a time when both those states will find it fiscally hard to respond. And impossible to trump.Truth be known, Victoria's state-based taxes are about 20% higher than Queensland and then you have things like Queensland's lower payroll tax, workers' compensation premiums and the vital issue of Victoria's ferally militant construction unions. I met a couple of senior construction industry figures in Brisbane last week and they said Victorian projects always attract a 20% cost premium thanks to the union thuggery in the city which boasts the head office of the ACTU. Queensland is easily the cheapest place to employ people on the east coast, even though there are inevitable growing pains from being the world's second fastest growing city.
As for Queensland struggling to respond to Victoria's tax and spend budget last week, there is the small matter of Queensland Investment Corporation being more than fully funded for public sector superannuation through its $50 billion-plus investment pile – something no other state or the Commonwealth can claim. Queensland taxpayers also still own most key public assets such as ports, airports, rail, electricity, water and roads.
NSW taxes are about 10% above the national average and almost 30% higher than Queensland which dominates by having no state-based fuel excise, although a High Court decision means these are now actually levied by the Federal Government. In fact, Queensland's balance sheet is about $20 billion stronger than NSW and the gap is likely to widen by at least $2 billion a year if NSW does nothing to alleviate its unsustainable budget position.
Victoria is about half way between its two rival eastern seaboard states, but trending in the wrong direction with plans to borrow another $4 billion over the next four years despite a supposedly booming economy.
Based on the current trends, it is simply a case of if not when Queensland becomes Australia's biggest state economy. Victoria will probably be demoted to third place by 2020 and NSW could surrender its "premier state" title by as early as 2030.
5. A deluge of anti-pokies submissions in Victoria
By Stephen Mayne, author of this submission to the Victorian Gaming Review
The Victorian government has been deluged with 110 submissions to its Gaming Licences Review, including a very strong attack from 34 different Victorian councils, many of which now face the ignominy of seeing their residents spend more at the pokies than in local rates.
However, the most interesting aspect of the submissions is that the all-powerful Herald Sun has turned them into this very strong front page splash today depicting greedy pokies companies such as Tattersalls, Tabcorp and Woolworths putting their hand out for more when Victorians already lose about $2.4 billion a year playing them.For some reason The Age completely missed the story today which we certainly hope wasn't because Fairfax chairman Ron Walker has personally made about $70 million from Victorian government gaming policies and Woolworths CEO Roger Corbett is still considered Ron's heir apparent on the Fairfax board.
The Tattersalls submission is predictably upbeat about Victoria's "highly successful gaming industry" and called in a raft of experts from Access Economics, accountants PKF and ACIL Tasman. Tatts gloats that Victoria's pokies lead the nation in terms of annual per machine returns to taxpayers as follows:
Victoria: $34,098Indeed, state and federal taxpayers scoop up 49% of all player losses in Victoria but Tattersalls points out this figure is only 27% in NSW. No wonder Bob Carr and Michael Egan tried that new pokies tax on the all-powerful NSW Clubs, something which Morris Iemma eventually caved on.
NSW: $9,101
Queensland: $13,182
South Australia: $21,070
Tattersalls has also revealed some very interesting charts showing how much more profitable poker machines in pubs are when compared with clubs, which explains why Woolworths derives such a large percentage of its hotel profits from Victorian pokies. The following is annual player losses per machine:
| State | Hotels | Clubs |
| Victoria | $114,909 | $60,882 |
| NSW | $66,291 | $44,193 |
| Queensland | $48,368 | $37,360 |
| South Australia | $56,055 | $33,104 |
Why is this so? Because Victoria's abominable industry structure gives Tattersalls and Tabcorp heavy incentives to place as many machines as possible in the poorest suburbs where brain-dead citizens happily gamble away their net assets. The duopolists also compel the pubs to stay open as close to 24 hours as possible and offer loyalty programs and cheap food or else risk losing their machines.
The system creates exactly the wrong incentives and will almost certainly be changed, which should make Unitab shareholders extremely wary about leaping into bed with Tattersalls when it carries all this political risk, something The Age's Stephen Bartholomeusz pointed out today.
17. The sporting pollies deluge continues
By Stephen Mayne
So, which political party is most likely to preselect sporting types in winnable seats? Step forward the Victorian National Party which has four former VFL/AFL footballers – Hugh Delahunty, Damien Drum, Peter Hall and Bill Sykes – out of a total of 11 MPs. These lads dominate the latest batch of editions to our growing list of pollies who excelled at sport.
Hugh Delahunty: Nationals Member for Lowan in the Victorian Parliament since 1999 and played for Essendon in the 1970s.
Peter Hall: Nationals Member for Gippsland Province in the Victorian upper house since 1988 and played 37 games for Carlton 1971-74.
Chris Natt: Former Port Adelaide ruckman who became NTFL president before winning the seat of Drysdale off the CLP for Labor at last year's Territory elections.
Bill McGrath: Jeff Kennett's former Agriculture and Police Minister played one season for South Melbourne alongside Bob Skilton before returning to the Wimmera.
Ron Best: Said to be the best footballer never to play VFL. The former National Party MP and husband of current Victorian Liberal deputy leader Louise Asher still holds the goal kicking record in the Bendigo League with 161 goals, and was vice captain of the country Victorian team.
Sir Gordon Freeth: Gold medallist in rowing at the 1938 Empire Games and then won the federal seat of Forrest in 1949 before serving as a minister in the Menzies, Holt and Gorton governments before becoming Australia's ambassador to Japan in 1970.
Sir Frank Beaurepaire: Six-time Olympic swimming medallist who was Lord Mayor of Melbourne from 1940 to 1942.
Edward Best: Won three bronze medals in athletics at the Sydney Empire Games before becoming Lord Mayor of Melbourne from 1969-71.
Two more who fell short
Shirley Strickland: One of the founding members of the Australian Democrats and stood five times as the number two Democrat Senate candidate in WA, meaning she probably didn't want to get elected, but happily lent her celebrity support.
Rocky Galletari: Former Australian boxing champion Rocky Galletari stood as a Liberal candidate for the seat of Cabramatta in the NSW state election in 1995. Infamous for having an AVO taken out against him by the successful Labor candidate – and current member of the Iemma ministry – Reba Meagher.
28. For God's sake, what can the Socceroo fans sing?
By Stephen Mayne, embarrassed Aussie sporting fan
Did anyone else grimace hearing Waltzing Matilda booming around Rotterdam's De Kuip Stadium as the Australians took on the Dutch in Sunday night's unfriendly friendly?
As someone who has been to plenty of big international sports events over the years – French Open, two Wimbledon finals, 1999 World Cup cricket final, 2000 Olympic soccer final, 1997 British Open golf, Arsenal v Chelsea at Stamford Bridge, Manchester United v Juventus at Old Trafford, Real Madrid vs Athletico Madrid, etc etc – I've come to the conclusion that Australians are hopeless fans.
Indeed, part of the reason Cricket Australia is trying to minimise Barmy Army numbers during the forthcoming series is that the Poms comprehensively out-sing their convict cousins.
I spent three days on the Western Terrace at Headingly during the 1997 Ashes tour when the Australians flogged the Poms in four days but were comprehensively out-sung, out-chanted and out-gagged. As the Yorkshire crowd belted out little ditties such as "He's fat, he's round, his a*se is on the ground, Shane Warne, Shane Warne", the 3,000 or so Aussie could come up with nothing in reply although I'm still proud of my effort in getting "Ivan Milat from Australia" called over the loudspeaker system.
At one point, a drunk Pom turned to a group of blokes in NSW State of Origin jumpers and said: "C'mon Aussie, sing us a song." The pathetic reply – "Aussie, Aussie, Aussie – oi, oi, oi."
If Barrie Cassidy can come up with a new version of The Man from Snowy River on Insiders, surely we can use the internet to co-ordinate some decent singing come 12 June when at least 15,000 Australians dressed in green and gold will be there to see our boys take on Japan.
Sure, we'll never have anything as good as the Poms and Swing Low, Sweet Chariot – but there's got to be something better than Waltzing Matilda. However, we're not accepting anything which mentions the war as the Poms are still in disgrace for their "Two world wars, one world cup" chant whenever they take on the Germans in soccer.
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