Bob Carr has now flogged off mines, trains, roads and betting monopolies but questions remains as to whether taxpayers are getting a good deal.

It hit a low of $1.05 last August, roared back up to $2.50 in May, and was last at $1.75 before being suspended from trading.

On Monday, Centennial announced that it would buy seven Powercoal coal mines from the New South Wales government for $306 million. Centennial will issue $100 million in shares and raise debt to pay for the acquisition of the Powercoal mines.

Following the transaction, Centennial will have $5 billion of long-term contracts to supply New South Wales utilities, supplying fuel to 30 percent of electricity in NSW.

Our old mates at the Millionaire Factory advised on the acquisition of Powercoal and will underwrite the upcoming share issue.

The Age described the buy as a “bargain”, although it includes guaranteed job protection for 1,100 workers. Could we therefore conclude that NSW taxpayers are underwriting these jobs in the form of lower proceeds to government (which is being used to reduce government debt)?

Given that the indicative price range was from $350 million to $600 million, NSW taxpayers probably have been sold a pup. Althought taxpayers have avoided a $250 millon capital investment program.

Afterall, this is the state that insisted on job security for their State Bank workers and sold the business for about $280 million to Colonial and watched it grow to be worth about $5 billion when the ComBank bought it five years later. These have got to be the most expensive paper shuffling jobs that taxpayers have ever subsidised.

Bob Carr’s privatisation record

The coal deal reminds us that it might be time for Crikey to have a look at privatisations under Bob Carr and whether NSW taxpayers have got a good deal.

A few more to kick start things:

FreightCorp The sale of FreightCorp to Patrick Stevedoring is complicated because of the various employee obligations assumed by Patrick and the fact that the Federal Government assumed $351 of FreightCorp’s debt before the sale. The surge in the Patrick and Toll Holdings share price immediately after the FreightCorp/National Rail purchase suggests that the buyers got a good deal. The final word might come courtesy of the NSW Auditor General. Their draft report suggests Patrick picked up a bargain, but with a first quarter loss posted by FreightCorp, it’s hard to tell at this stage.

NSW TAB Floated at $2.20 in 1998, soared to $3.50 within 6 months of floating, has waxed and waned since then but currently trading around $3.20. Early share price surge suggests the NSW government may have flogged it off for too little, but hard to reach any firm conclusions on this one.

Eastern Distributor – a shocking deal for taxpayers as Macquarie Bank and Leighton just out-negotiated the transport department and then finished the airport to city tollroad early and sat back and counted their money as their equity more than tripled in value.

Funny money deals

The Carr government has also done a couple of shocking deals designed to improve the budget by bringing in cash upfront and creating big liabilities down the track. As an example, this is what Crikey wrote for The Eye in 1999 about the cross-border financing deal on the Mt Piper power station in late 1996. Talk about Enronitis. Public sector accounting is undoubtedly far more dodgy than anything we see in our major listed companies:

From The Eye’s Bitch column

“Paul Keating, the man who used to close tax loopholes and maximise revenue during his years as federal treasurer, is consulting to a financing group called Allco, which specialises in global tax-effective financing schemes on big-ticket infrastructure and capital projects. Allco was run by John Kinghorn for many years, who has now moved on to run the home loan specialist RAMS, which also uses Keating as a consultant.

Kinghorn makes no secret about what Allco does from its offices in places like Stockholm, Frankfurt, New York and London. “It is totally tax and cross-border financing,” he explains. “It’s financing big ticket items such as power stations, aircraft and rolling stock.” Sounds like a perfect job for Keating, who was a little miffed when Bitch called to inquire about the arrangement, particularly when we asked if he had advised on the controversial cross-border leasing deal put together by the NSW government in late 1996 on the Mt Piper power station. This tax-effective deal had the artificial effect of improving the 1997-98 NSW budget outcome by almost $200 million.

The spindoctor for NSW Treasurer Michael Egan confirmed that Allco won the deal in a joint venture with Babcock and Brown after 10 groups were invited to tender. Keating told Bitch: “I don’t work for Allco, no,” but continued, “I try and do some things of mutual interest with them from time to time.” What sort of things? “That’s for me to know, old son, and you to find out,” replied the former PM. You thought you might be able to stir up a bit of crap about me,” he chipped in. Finally, we actually got the answer about Mr Piper: “No, it was all done before I had anything to do with Allco”.

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey

JOIN NOW