This story was originally published by InQueensland.
Queenslanders are going to have to put a lot of trust in QIC boss Damien Frawley to carry this bid for Virgin because this is not an investment, it’s something else entirely.
It has been a few years since we saw Queensland Inc strutting its stuff down George Street so it’s timely to remember just how badly the government has botched things when it dabbled in the market. The investment in Virgin sounds like a political decision, not one that has come from within the sharp pencils of QIC.
We can surmise that because the Queensland government had already put its hand up for $200 million to have Virgin Mk II base itself in Brisbane without mentioning QIC. They were willing to throw $200 million of taxpayer money at reviving a company that had just collapsed with almost $7 billion in debt with very little to show in return on investment.
That’s not a sound basis for investment. You can guarantee that when QIC does its modelling on whether to invest in a company it doesn’t have anything to do with collapsed corporations overburdened with debt, crippling costs and in an industry littered with failures and government bailouts.
It might be politically astute to do this in an election year to save the estimated 5000 Virgin jobs in Queensland but when your revenue has been shattered and you can’t even deliver a budget, it’s a brave government that tries to throw a few hundred million at a failed company.
Dubbing it “Project Maroon” and giving it a State of Origin flavour just adds to the concern.
We can go back to the less than glorious Dallhold Nickel days when the Bjelke-Petersen government bailed out the company and was left with a 28% stake in the company that caused all sorts of pain. It was eventually unwound in the early Goss era, notably for a profit and with Alan Bond’s involvement, but it was a long time coming and caused serious political and financial pain for the government.
Or we can look at the days known as Queensland Inc when the government actually held equity stakes in local companies to avoid them being bought out by southern raiders, which sounds horribly familiar. It encouraged the major corporates to buy cross-shareholdings in each other and at one stage it had a stake in the Castlemaine brewery which led to yet another interaction with Alan Bond.
It also had a stake in companies such as Evans Deakin and maintained a stake in Suncorp for many years after privatising it to protect it from takeovers. That is just an open door for bad governance.
Queensland Metals Corporation was a good idea to produce light metals for the auto industry at the turn of the millennium that became a shambles and it was the Queensland government that not only threw $100 million of taxpayers’ money into it, but was also responsible for urging investors to pile in by guaranteeing dividends … and they did with another $400 million. The federal government added another $150 million.
It was all lost. A big smoking ruin of political overreach.
The government also burnt its fingers on the disastrous BrisConnect tunnel projects, which it backed and watched thousands of shareholders lose money when it collapsed.
The dangers are not just financial. When Adani was trying to raise funds for its Carmichael project the federal government was considering intervention. Adani didn’t need the money but having a government on board gave it cache and meant the risk of nasty legislation would not happen. As one Adani executive said at the time, the government would have skin in the game.
Compare this record with QIC’s investment record. It has a rich history of making money for the public servants super funds. It is regarded as one of the nation’s best investment houses.
Frawley has backed the plan for Virgin and QIC will manage the investment that will possibly be in a consortia of other companies.
We have to take his word that it stacks up because the history is not good.