Snowy float, Labour,ASX, Workchoices

3. Snowy Hydro cries poor; Crikey has the solution

By Stephen Mayne

Snowy Hydro CEO Terry Charlton has finally launched a decent argument to support the $3 billion float – but it's about three months too late.

The Age's Rod Myer had the story this morning from Charlton who now claims Snowy won't be able to implement much of a $1.5 billion investment program over the next five years. Capital investment in the iconic project will now be withheld, debt increased, dividends to the three governments possibly suspended and planned acquisitions shelved.

However, there is a simple solution to all this which John Howard ought to feel obligated to embrace. Snowy needs a capital injection to reach its potential and the Federal Government has the strongest budget position of the three government shareholders.

The valuations have all been done for the float, so the price could easily be set at the top of the book build range that valued Snowy's existing equity at $2.5 billion. This meant the Federal Government's 13% stake was worth $325 million, Victoria's 29% stake $725 million and NSW's 58% stake $1.45 billion.

A modest $400 million injection from the Commonwealth, possibly even the Future Fund, would lift its stake to 24.16%, bringing it in line with Victoria and diluting NSW's share down to 48.33%.

The other solution would be to return to the situation we had when the Howard Government first came to office – Commonwealth debt sitting on the Snowy balance sheet. Peter Costello privatised this $800 million debt and ran the proceeds through his budget when he was dealing with Paul Keating's $10 billion budget black hole, the Asian economic crisis and everything else that made his first couple of years as Treasurer difficult.

However, Snowy can't afford to lose the BBB credit rating on its existing $950 million debt because anything lower would jeopardise its burgeoning hedging and insurance operations. You can't offer complex derivatives contracts without a rock solid investment grade credit rating from reputable agencies.

The Future Fund currently has $18 billion on deposit with the Reserve Bank at the official cash rate of 5.75%. Wouldn't it make more sense to lend $1.3 billion to Snowy Hydro at 7% and then the good old government guarantee would mean the business would be AAA rated and could offer derivative contracts with gay abandon?

John Howard created this mess; his government has an obligation to contribute to the solution. He's either got to stump up some fresh equity or offer support on the debt side.




5. Why Labor needs a hip replacement

By Stephen Mayne

Good corporate governance, reduced conflicts of interest, independence, freedom of association, one vote one value. These are just some of the mantras that governments, regulators and businesses around the world have increasingly embraced in recent years.

However, all of these notions are affronted by the ALP's formal association with the Australian union movement, which gives affiliated unions a guaranteed 50% vote at all party conferences and effective control over all preselections.

Being captive of this union gerrymander means the ALP has a bias against the unemployed who aren't in the union club and also gives priority to highly paid Australian workers over their comrades battling it out in Asian sweatshops, who would love to work in Australia.

Look no further than Kevin Reynolds, boss of the CFMEU in WA, telling an employer on 2 June to "take you and your bloody Filipinos and piss off" in this story on PM.

John Howard is right to say that union power clearly explains Kim Beazley's pledge to abandon AWAs – although he somehow managed to tell some of the 30 business observers that paid $5000 to attend last week's NSW state conference that Labor's ties to the unions don't mean much these days.

Go to this page on the Victorian ALP website to check out membership conditions and you'll find the following:

A person applying for membership must be a union member, if eligible, with an affiliated union. Members of an affiliated union receive a $5 discount on their fee. Use the "Choose Union" link below to select your affiliated union. If your union does not appear in the affiliated union list, please enter your union name in the box provided.

You then have the survey which asks whether you employ labour and then states "If yes, please confirm that you undertake to employ only trade union members." This whole union gerrymander is re-emphasised in "the pledge", where new members promise to support Labor and its candidates and to "actively encourage trade union membership".

With private sector union membership down to 20%, it really is time the ALP had a long overdue hip replacement operation. How on earth can it remain a broad-based political party when one special interest group literally has formal control to the exclusion of all others? There should be a formal separation so the ALP is genuinely independent, leaving union members, like anyone else in the community, free to join the party, while some unions could even choose to donate.




6. Why the ASX was right to dump D'Aloisio

By Stephen Mayne, small SFE Corp shareholder

It was always a slightly strange appointment to make career corporate lawyer, Tony D'Aloisio, the chief executive of ASX Ltd 20 months ago. The bloke had no experience running a company, let alone a lucrative monopoly with a quasi-regulatory role.

The single most important role for any ASX CEO is to keep out of sight of the regulators, who might one day blow the whistle on the fact it has massively abused its monopoly position to deliver a 200-fold return for the lucky 606 stockbrokers who owned the operation before it was demutualised and privatised in 1998.

Chairman Maurice Newman AO, an old mate of the PM, has served that role quite well and former CEO Dick Humphry was also tight with the Liberal Party. To cover its Labor bases, the ASX board brought in Kim Beazley's former chief of staff, Michael Costello, to be deputy chief executive and, surprise surprise, there were no complaints from the ALP when this not-for-profit regulator suddenly became a massively conflicted gouging listed monopoly.

The problem with D'Aloisio is that he came along with a ridiculously brutal agenda, to cut costs and jack up fees, which was starting to frighten the horses. Internal memos started flying around the internet from disaffected staff who were shoved out the door – an issue that was even raised by Alan Kohler during this interview on Inside Business last year.

D'Aloisio also appeared soft on regulation and market integrity when he embraced new trading rules that allowed brokers to trade without disclosing their identity and also inexplicably allowed an obviously conflicted Westfield to vote its shares in the GPT internalisation proposal last year.

D'Aloisio was also keen on reducing customer service. The ASX home base in Melbourne at 530 Collins St, complete with the popular public viewing area for trading and lectures, was last week dumped for a much cheaper and smaller leasing deal across the road at the Rialto. Weekly free lectures have also been dumped for much more expensive monthly offerings.

In other words, D'Aloisio was making too much noise and trying to push his monopoly too far – a bit like all those fee increases by Sydney Airport, although it was protected by having the PM's old departmental boss, Max Moore-Wilton, in charge.

SFE Corp CEO Robert Elstone has done a great job for the past five years and doesn't appear to have upset anyone. Given that Peter Costello appointed him to the Future Fund board, he also has that all important good relationship with the most important regulator.

It's a sad reflection on corporate concentration in Australia, but the combined ASX-SFE must do all it can to stay sweet with politicians and regulators. The trick is to be subtle and not to get too greedy, and D'Aloisio was not performing well on either score.



20. MEAA joins the political fight over WorkChoices

By Stephen Mayne, unhappy member of the MEAA

I've been a member of the Media Entertainment & Arts Alliance (MEAA) for most of the past 16 years and value its Friday newsletter, career development seminars, campaigning for press freedom and the excellent job it does running the Walkley Awards. I've even just rolled over $28,000 in News Ltd superannuation to the affiliated Journalists Union Superannuation Trust (JUST).

Given the sensitive political role of journalists, the MEAA wisely declines to donate to the ALP like most other unions. However, this week a letter has arrived informing members there will be levy to contribute to the ACTU's campaign against WorkChoices.

This is just getting too political. I actually support more labour market deregulation because, even after WorkChoices, our system is still full of rigidities that constrain Australian business more than most of our competitor countries.

It also creates a major conflict of interest for MEAA members who have to cover the industrial relations debate that will probably be the most important issue at next year's federal election. These journalists should not be funding a blatantly political campaign.

Mind you, there's plenty of conflicts of interest amongst media companies as well. Mark Latham wrote this in his diary after a cosy dinner at Cavan with Lachlan Murdoch and News Ltd CEO John Hartigan on 11 March 2004:

Two main political issues: AWAs and Foxtel. Murdoch's company has the highest number of AWAs in the country; all their journalists are on individual contracts. Hartigan pressed hard for me to drop our policy dedicated to their abolition, but I told him there was no chance of that.

Latham was never going to get support from the Murdoch press because of industrial relations, Iraq and the US alliance. Beazley can potentially neutralise the last two, but his IR policy will guarantee opposition from the Murdoch press, which has a massive conflict that thoroughly discredits any editorial stand they take.

Where's the disclosure at the bottom of every IR story: "News Ltd employs more people on AWAs than any other Australian employer".

Copyright © 2024 The Mayne Report. All rights reserved

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