The Howard Government has today announced a $100 million grant to the privately-owned HRL Ltd despite the company’s history as the largest exploiter of Labor’s tax incentive scheme for research and development.
The Herman Research Laboratory was the research division of the old State Electricity Commission of Victoria.
Back in the early days of the Kennett Government, when the state had no money but our Jeffrey was dead keen to simultaneously grovel to media moguls and privatise everything that moved, a particularly grubby deal was reached with Kerry Stokes.
There was no tender for the privatisation of HRL and its research. The deal was rushed through on the last day of the financial year in 1994. The details not disclosed. It was finalised by Premier Kennett who signed the documentation himself.
As Kerry Stokes tells it, it began when the Premier rang personally inviting him to invest in Victoria. According to a glowing account by Mr Stokes in his company newsletter, the Premier said: “Just bring your money and come. If there’s any red tape, we’ll cut through it.” It was a complicated deal. But amazingly, Mr Stokes recalled: “After what seemed like a wave from Mr Kennett’s magic wand, all the complexities disappeared.”
The attraction of the deal — apart from the potentially huge profits — was the fabulous tax benefits. Under a federal scheme to promote research and development, the money invested in the HRL research is “refundable, and tax deductible”. Hence the rush to complete the deal by the end of the financial year. Even if the project fails, the investment syndicate led by Mr Stokes’ company will get back all of its money, plus a guaranteed return of between 20 and 30%. This scheme has since been abolished by the Federal Treasurer, who said it had more to do with tax minimisation than genuine research.
Lo and behold, John Howard and Peter Costello have now decided to gift the same company $100 million.
Let’s hope tomorrow’s coverage takes in a flavour of this history.
Seven Network spinner Simon Francis writes: Almost 13 years ago, Kerry Stokes invested in a Bain & Co deal on HRL. He didn’t instigate the deal. The Bain syndicate beat out another two syndicates. At the time, Jeff Kennett was in power in Victoria (pardon the pun) and John Howard was not leader of the Opposition let alone Prime Minister. To now claim that the Prime Minister’s son is somehow linked to a government investment in “clean coal” is approaching ludicrous. Kerry Stokes’s private companies own a 20% shareholding in HRL, which has invested $130 million of private capital into developing a pilot plant to test new technology. This new technology has been shown to reduce emissions from wet brown coal by around 30% and there’s now a joint venture with the electricity authority in the Chinese province in Harbin to introduce this new technology. The technology works. Hence the government’s investment in the project after a private investment of $130 million over the past decade. Mr Stokes would like to counter the “particularly grubby deal” allegation in Monday’s Crikey with the point that it was a competitive tender against two significant bidders. He would also like to point out that at no time during the process did he speak to the Victorian or Federal Governments about his initial investment or the tender process. We suspect that private capital developing a new technology that reduces emissions from coal by 30% and a government commitment to further develop and take this technology to the world would be welcome. Not something – as Crikey would claim – you’d call grubby.