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Legislative Assembly for the ACT: 1999 Week 4 Hansard (22 April) . . Page.. 1159 ..


ACTEW - Proposed Merger

MR QUINLAN: Mr Speaker, my question is to the Chief Minister. During the ACTEW privatisation debate the forces of light and reason effectively dismissed profitability from electricity retail activities in valuations of the enterprise, including only profitability on electricity distribution activities along with water and sewerage operations. We relied upon ACTEW's own forward estimates, which ABN AMRO thought sufficient of to incorporate into their report on their scoping study. We did so because the major rationale put forward to justify the proposed sale was the risk facing those earnings and their questionable sustainability. Will the Chief Minister, contrary to some of yesterday's statements, concede that the current earning level of GSE would be a very poor base for valuation for the enterprise in any merger negotiations?

MS CARNELL: Mr Speaker, again I will answer the question. Again, Mr Speaker. A working party has been set up between the New South Wales Labor Government and the ACT Government. It is being headed up by the heads of treasury in both areas - a Labor State and a Liberal Territory. Those particular people and the working party will look at the proposed merger to see if it really does have the capacity to give two small electricity distributors an opportunity to have a much more solid future and to be able to achieve the sorts of price levels that will be needed now and into the future to be able to compete in a very competitive market.

Mr Speaker, the sorts of things that will be looked at by that working party are such things as the valuations of the two entities, cross-border issues with regard to regulation, the various prices of electricity and, obviously, other issues as well. It will then be recommended to both governments as to which direction to take; or whether the merger is even an option, Mr Speaker. It certainly would appear, at least to me, looking at all of the issues that we have on the table at the moment, that a merger just may be the way forward for both Great Southern and ACTEW. It certainly gives both of those entities a capacity to compete in the market.

Mr Quinlan asked a question again that is based on pure supposition, Mr Speaker. Issues will need to be addressed, there is no doubt, but a valuation will be carried out on both entities, based upon normal valuation approaches. These normally are cash flow, profitability, all the sorts of issues that are usually taken into account when assessing the value of two entities that may, if everything pans out, merge in the future. Of course, at the end of the day, this Assembly will be the entity that makes the decision.

MR QUINLAN: I have a supplementary question. Will the Chief Minister discuss with her representative on the working party the very logical process of limiting ourselves to asset valuations and the earning capacities of the natural monopolies of electricity distribution, water and sewerage services, thus avoiding leaving ourselves in a bargaining position which could even be weaker than that we find ourselves in in relation to Bruce Stadium, where we have spent money on development and we have not even negotiated on its acquisition?

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