Legislative Assembly for the ACT: 1998 Week 11 Hansard (9 December) . . Page.. 3354 ..
MR STANHOPE: Mr Speaker, will the Chief Minister agree that she should increase the reserve price that the Government has placed on ACTEW to account for the confusion in methodology that has undervalued the asset by up to $700m?
MS CARNELL: Mr Speaker, the Australia Institute uses accrual accounting figures and the long-term bond rate as the discount rate. While you would have to say that it is imaginative, it is not how it is done in practice. I accept that they had to think long and hard to work out what was wrong with ABN AMRO. They had to use their imagination. They had to come up with an approach that was still being debated by economists and they came up with a figure. I have to say that if, by chance, they are right and somebody pays $1.7 billion for ACTEW when we put it on the market, boy, we are away. Mr Moore's problems in Health will be solved. The whole situation will be good. So, let us hope that we do get $1.7 billion for ACTEW. When we put ACTEW on the market we will take the best bid - not necessarily the highest bid, but the one that is best for the community.
What we have here is the Australia Institute using a methodology that they accept is still being debated by economists versus ABN AMRO using a methodology that is used universally by the private sector and the public sector for valuing assets. At the end of the day, Mr Speaker, which one would you take?
MR QUINLAN: Mr Speaker, my question is to the Chief Minister. Love it or hate it, the Australia Institute report clearly and succinctly articulates the fact that the only element of ACTEW's operation that is subject to any discernible risk is the electricity retail process. Is there any justification for considering the sale of water and sewerage operations and, in fact, the electricity hardware beyond the pursuit of $1 billion, or maybe $1.7 billion, to fund the superannuation liability and probably to buy votes over the remaining term of this Assembly? Will you now concede that the risk is isolated to the electricity retail business?
MS CARNELL: Mr Speaker, one of the fascinating things about the Australia Institute report is that, when it talks about the electricity retailing market, it indicates, as Mr Quinlan has, that the capacity to maintain the profitability or even the gross revenue from electricity retailing is, to quote Mr Quinlan, zip, non-existent, does not exist. They are Mr Quinlan's words. The Australia Institute do not actually say that in the report; they actually suggest that it is a bit shaky here.
Mr Speaker, we know - at least, I hope Mr Quinlan knows - that 30 per cent, I think, of the gross revenue of ACTEW last year came from electricity retailing. So, it is not an insignificant part of the gross revenue. In terms of profit, it was nearly $19m. Mr Speaker, I have to say, from my perspective, that that is quite a large amount of money. One of the things that the Australia Institute report does not do is take into account the risk of loss. I think that that is a fundamental problem with this report.