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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2008-09-10 Daily Xml
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BABCOCK & BROWN

Mr GRIFFITHS (Goyder) (15:56): Can the Treasurer advise whether Babcock & Brown is still a partner in the shortlisted consortia bidding for the privatisation of schools, prisons and health facility projects in South Australia? Babcock & Brown was announced earlier this year as a partner in two bidding consortia. Since that time, the share price has collapsed and the parent company has been removed from the ASX Top 200.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:57): I am glad the member has asked this question because it will reflect on his time in government, and I am happy to make some comments about another involvement of Babcock & Brown.

Members interjecting:

The Hon. K.O. FOLEY: That old left-wing socialist outfit over there, they do not involve themselves with PPPs. You don't like PPPs. You are the only political outfit in the nation, including every other Liberal around the country, who is not into it.

Mrs Redmond: It is not the only way to go.

The Hon. K.O. FOLEY: It is the only way to go.

Mrs Redmond: I said I think it is not the only way to go.

The Hon. K.O. FOLEY: Whatever. Pinnacle Education SA is a consortium involving Babcock & Brown and Hansen and Yuncken, and Spotless as facilities manager. With the prisons, we have a partnership called Secure Partnerships SA which involves Babcock & Brown, Multiplex, Hansen and Yuncken—construction being Multiplex and Hansen and Yuncken; facilities management, Transfield Services; operations and security, Transfield Services and IPP consulting.

On a number of occasions, in discussion with my officers and consultants, I have raised the financial position of Babcock & Brown: is that material in relation to the PPPs? The advice I have at this stage is no, nor should it be, because they are a trading company and they are a solvent company. They are a company about which it would be irresponsible and reckless for me to say or do anything that would in any way impact adversely on that company.

What may not be known by some members is that the Liberal Party, when it privatised ETSA, sold off our power stations.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: I liked it.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: When the Liberal Party sold our power stations, the government was—

Mr Hamilton-Smith interjecting:

The SPEAKER: The Leader of the Opposition will come to order.

The Hon. K.O. FOLEY: The government was backed out of the business of running power stations. Members may recall that soon after I came into office a company called NRG Energy, which had bought the asset, experienced serious financial difficulties. Another deal done by the former Liberal government has a contingent liability on the state of South Australia of approximately $150 million, which relates back to the arrangements for the Osborne Power Station entered into by the Liberal government in 1996.

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: I think the finance minister might want to listen to this, because this is where the torch gets turned on the Liberal Party. People may remember that NRG had to sell—

Members interjecting:

The Hon. K.O. FOLEY: I would actually suggest that members be silent for a moment and listen to this because this is quite serious.

Members interjecting:

The SPEAKER: Order! Members will come to order.

The Hon. K.O. FOLEY: When NRG was put on the market, I took a very brave move, and the government did, where we made it clear to the creditors that we would be stapling to the asset the $150 million of what are called FOT liabilities. They are the financial liabilities from the deal done in 1996 for the cogeneration plant. The banks went mad at me, but we did that, because I was not going to cop $150 million loss on some dodgy deal done by the Libs. In the end, when the receiver of NRG sold the power station, from memory, there was but one bidder. And, do you know who that bidder was? Babcock & Brown Power.

Babcock & Brown Power is one of the spin-off vehicles from parent company Babcock & Brown. It has an infrastructure fund or a trust fund, or whatever, where the parent company charges upfront fees and very high management fees, and the vehicle, Babcock & Brown, sells its share to the general retail market. Babcock & Brown Power's price is down, I think, about 92 per cent. It is now being underpinned by, I think, either a parent guarantee or some form of covenant from the parent Babcock & Brown. I am concerned about the financial strength of Babcock & Brown Power. I am monitoring it on a regular basis. I am seeking a meeting with the CEO of Babcock & Brown to make sure that commitments given to government are honoured.

What I can say is that the Port Augusta Power Station remains a very profitable and a very good business. But Babcock & Brown Power is a vulnerable investment vehicle—the markets are all saying that—and that does cause me concern. That is as a direct result of your decision to sell that power station, because we cannot control who owns that power station; it is the market.

Members interjecting:

The Hon. K.O. FOLEY: So, your electricity nightmare sale still comes back to this day, a decade later, to haunt this government. Luckily, I am here to manage it. I would say that it is yet again because of the failed policies of the former Liberal government that the risks are now having to be managed by this Treasurer.

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