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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2008-10-15 Daily Xml
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SA WATER

Mr WILLIAMS (MacKillop) (14:54): I will. My question is to the Treasurer. Why is the Treasurer forcing SA Water to borrow money to pay dividends to the Treasury? The Treasurer has received $2 billion from SA Water as cash payments, dividends and capital returns to general revenue over seven budgets. The figure is expected to rise to $2.5 billion within the estimates period. This year the Auditor-General has again raised concerns that SA Water is borrowing money to pay its dividend to the Treasurer. The Auditor-General also notes the adverse impact this has on SA Water's capacity to invest in water infrastructure.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:54): Those of us who have been here long enough will remember that the Liberal Party, when it came into office in 1993—

Mr Hamilton-Smith interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: Apparently it is okay for him to mention the State Bank from 1989 or 1992 or whatever it was, but I cannot mention when they came into office. I mention it not by way of criticism, but by way of compliment.

As Greg Kelton would certainly remember, and some of the younger tackers from the media up there—John, you are old enough but you probably were not around here—the Liberal government had an audit commission. One of its key recommendations was that the government's then-owned utilities (such as ETSA and the water company, the E&WS) should be corporatised and operate as companies would, as publicly listed entities, in an economy. In doing so they should both return dividends to shareholders that are comparable to what a public corporation would deliver to shareholders and also pay tax equivalents to the federal government as if they were public companies.

What followed on from that was the National Water Initiative, introduced, I think, largely under the Howard government, which then also put them under a much stronger framework, where water pricing had to start to reach a point where it properly reflected the true cost of the commodity—and we are working our way through that—and the water utilities had to maintain an appropriate level of gearing. I say that by way of context because these were the entities that were created in the early to mid-1990s, and we supported that.

A few years ago, we reworked a policy paper (an agreement with, in the end, the SA Water Board, Land Management Corp and, I guess, Forestry Corp), and that was essentially a dividend policy and the requirement of dividends to be paid back to shareholders—and I think, in most cases, 90 per cent of after tax profits, and I could be wrong there. It is an appropriate framework that all entities agreed to. It is then up to the corporation—

Mr Williams: They all agreed to it?

The Hon. K.O. FOLEY: Sorry?

Mr Williams interjecting:

The SPEAKER: Order! The member for MacKillop will come to order.

Mr Williams interjecting:

The SPEAKER: Order! I ask the member for MacKillop to come to order.

The Hon. K.O. FOLEY: So, this is where they again try to work both sides of the street. If they are honestly saying that we should not take a dividend from SA Water, what will they then do with the black hole that will emerge in public finance? Since day dot, SA Water has provided dividends to government—

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: This was a framework that then minister John Olsen put in place to which we agreed, and it has been operating under both sides of politics, under both governments—

An honourable member interjecting:

The Hon. K.O. FOLEY: It has.

Mr Williams interjecting:

The SPEAKER: Order! The member for MacKillop.

The Hon. K.O. FOLEY: This has been operating under both sides of politics. It is then up to the corporation to manage its internal cash flows to meet the requirements of the shareholder and if, on any given year, it chooses to spend more on its cap X and borrow to meet its dividend requirement to government, they are operational issues. The gearing level of SA Water is very low—some would argue that it is lower than it should be.

I have just remembered something—and my colleague the then shadow minister for energy may remember this. The Liberal government, before it privatised ETSA, from memory, does anyone recall them shifting half a billion dollars of borrowings? They used ETSA to borrow half a billion dollars and put it on to ETSA's balance sheet—they are not listening to this; this is a bit of history they do not want to hear. From memory, and I could be wrong, they actually borrowed half a billion dollars and put it into ETSA to get it off their balance sheet. So, they were in the business of trickiness, when it came to their cash accounting methods and methodologies. These entities are properly structured, with a proper board and a proper delegation of management authorities, and there is nothing untoward in what they have done.

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