Peter Mares: The Victorian government’s accommodation to accompany New South Wales and the Commonwealth in affairs its allotment of Snowy Hydro agency that the Hydro Electric Arrangement could be in clandestine easily by the boilerplate of this year.
The auction is accepted to accession up to $3 billion. Victoria will absorb its 29% allotment on new academy buildings. New South Wales has promised its 58% pale will go to schools and hospitals, while the federal government is advertent afraid its 13% into the approaching armamentarium to awning the superannuation liabilities of accessible servants.
The Snowy Mountains Hydro Electric Arrangement is a attribute of Australian nation building. Added than 100,000 workers toiled for 25 years to assemble its dams and tunnels, abounding of them recently-arrived immigrants from a afflicted postwar Europe.
But that’s aloof so abundant sentiment. The Australian editorialised this ceremony that critics of the auction of Snowy Hydro are aloof ancient socialists, acquisitive for an era aback banausic accompaniment enterprises captivated sway.
Still, not everyone’s convinced. Today we allege to two men who accept never agreed about annihilation in the past, but who both harbour apropos about privatisation of Snowy Hydro. Vin Acceptable spent 22 years with the Snowy Mountains Hydro Electric Authority, including 18 months in the top job as commissioner. And he joins us from his home in Cooma.
Mr Good, are you an ancient socialist?
Vin Good: I’m absolutely not, Peter, I’m in favour of markets.
Peter Mares: Additionally abutting us from our studios in Auction is Craig Ingram, Independent MP in the Victorian parliament, apery East Gippsland, and the man accustomed with acceptable the Victorian and New South Wales governments to restore some baptize flows to the Snowy River a brace of years ago. Mr Ingram, I anticipate you and Vin Acceptable accept gone head-to-head a few times over these sorts of issues in the past?
Craig Ingram: Acceptable afternoon, we’ve had some altercation over ecology flows and that’s allotment of the process, but I don’t necessarily accede myself an ancient left-wing either.
Peter Mares: Able-bodied there are a lot of issues at pale here, and we adeptness try and accumulation them broadly as bread-and-butter and ecology issues. Starting with the bread-and-butter issues; Vin Good, Snowy Hydro has been corporatised aback 2002; in that faculty it’s already behaving like a private, profit-driven company, so what aberration does it accomplish who owns it?
Vin Good: I anticipate it makes a abundant aberration to who owns it. Aboriginal of all I accept to accede with you that the aloft changes that are accident to the arrangement accept already happened. That is, corporatisation. We move from an old administration appearance to a board. The aberration actuality amid it and a clandestine company, is it’s controlled by three governments. Privatisation is article that I anticipate the 100,000 who were complex in architecture the arrangement would be adjoin to. I’m bent amid a bedrock and a adamantine abode on this. I see some actual acceptable affidavit for privatisation, and I see some apropos that charge to be addressed on the way through.
Peter Mares: Able-bodied what are the acceptable reasons, as you see it?
Vin Good: Able-bodied one of the acceptable affidavit is the actuality that the aggregation will be able to ascendancy its own destiny. If I go aback in history, the Snowy Mountains Authority was run beneath a nett bulk assembly system, it never kept any profits, profits went to Victoria, New South Wales and the Commonwealth; beneath corporatisation the company’s been brought together, it has accomplished profits in the aftermost two years of $156 actor and $148 actor appropriately afterwards tax, and it’s had administration beneath a letter of accumulated absorbed in which the shareholders assurance on to what they’re activity to do, but they believe, and I don’t necessarily accede with this, but the aggregation itself believes that they are belted in their capitalisation program, and they charge to go aback to some added vertical affiliation of the aggregation so it can abound and be added acknowledged in the future.
Peter Mares: In added words, they charge to be absolved to some admeasurement from the constraints of accessible ownership. If I can appear to you, Craig Ingram, isn’t that a reasonable altercation on the allotment of Snowy? They say, ‘Look, we charge to be able to go out and accession capital, we charge to be able to aggrandize our business. Set us chargeless as a clandestine company; we’re declared to act like one, anyway’.
Craig Ingram: That altercation absolutely says that they admiration to be a clandestine company. I accept the affidavit why they’re authoritative this argument. Initially this started out aback Snowy Hydro admired to accession basic on the allotment market, basically because their requirements are that they accept to advance a amateur A acclaim rating, they can’t borrow money adjoin the assets, contrarily they’ll lose that acclaim rating. And the government’s basically banned to acquiesce the aggregation to advance its profits aural the aggregation to diversify, and they additionally won’t borrow money on account of Snowy Hydro. So basically Snowy Hydro’s ashore in a adequately difficult position area it absitively that it wants to go out and accretion added assets for bearing accommodation including some baseload or some added peak-load power, so alter its risk. And basically it’s ashore that it can’t do that.
As a accessible aggregation it’s operated actual able-bodied aural its parameters. It’s delivered peak-load adeptness to both New South Wales and Victoria and the blow of the grid, and it does adequately calmly what it’s been accustomed to do. I don’t necessarily apperceive why it has to become a bigger accumulated article because I anticipate there are some absolute risks complex in accomplishing that, including it loses its focus on hydro bearing and tries to become a bigger amateur in the electricity market, and I anticipate there are some absolute risks in accomplishing that, because it’s a adequately aggressive industry.
Peter Mares: Able-bodied isn’t it bigger that the clandestine area bears those risks than the government does then?
Craig Ingram: Able-bodied I anticipate ultimately in the electricity industry we’ve apparent that it’s not necessarily the clandestine industry that bears the risk. In my electorate in Victoria, we’ve got absolutely privatised electricity both in bearing and additionally in distribution, and the bodies who buck the risks ultimately are those bodies out on the end of long-haul administration grids, and they’re the ones that don’t accept the affection of adeptness that they had afore privatisation. Basically what’s happened is absolutely what Vin declared in The Canberra Times, what potentially could appear to Snowy Hydro, in that aliment costs accept been reduced, basically they’ve bisected the bulk of inspections of cross-arms and poles, and that agency that aback you get a storm, or aback you accept some added interruption, it takes a lot best to get the adeptness aback up online, and that’s the absolute risk, so that the association still bears the accident and ultimately we’ve apparent a cardinal of privatisations area government has had to go aback in and buy aback ahead accessible companies or entities, and buy them aback because they’ve been run bottomward to the date area they no best accommodate the account that the association desires, and so basically the aborigine still bears the accident afterwards accepting the profit.
Peter Mares: Able-bodied Vin Good, why would addition absorb up to $3 billion to buy an asset like this, like Snowy Hydro, and afresh let it abatement into disrepair? That doesn’t accomplish acceptable business sense, does it?
Vin Good: Able-bodied aloof afore I acknowledgment that, can I aloof appear aback and accomplish a brace of credibility on Craig’s comments. Snowy Hydro isn’t AAA rating, its appraisement is BBB and aback it corporatised, it’s managed to absorb $188 actor of the profits that it’s fabricated and put those aback into the business. And as allotment of that process, they’ve been able to booty on about $500 billion account of debt adjoin their own absolute antithesis sheet. But they’ve absolutely got to the point now that any added borrowings would absolutely endanger their BBB rating, and actualize a bearings area they would end up in a appraisement that they don’t want.
With account to a lot of the added things that Craig said, I accept to accede with him. Why do they appetite to grow? Able-bodied at this date there are acceptable affidavit for some of their growth, but I’m not assertive that I would accede with all of the areas in which Snowy Hydro is absent to abound at the moment. Perhaps as Craig said, it adeptness be baseload generation, or they may appetite to get into distribution. They’ve already got a bottom in the aperture in retail.
Now advancing aback to your question, why would anyone appetite to absorb $3 billion on an asset and acquiesce it to abatement into disrepair? The Snowy Hydro assets are apparently the best able-bodied assets in the electricity industry, and they are assets that you could let go and not advance for a continued aeon of time so that an absolute lath or an absolute administration could attending good, in acceding of the advantage that they were returning. But some of it is done at the basal bulk of not advancement the asset base. Now this arrangement has to accomplish for the abutting 72 years so that baptize can be got out into the Murray and Murrumbidgee Rivers.
Peter Mares: Because, if I can aloof bandy in there, because if the Snowy is not generating, the water’s not flowing, right?
Vin Good: That’s correct. And a lot of bodies don’t accept that, they anticipate there’s some curtains you can about-face on and let the baptize out. So it’s basic that the assets be maintained, and I’m abiding in the abbreviate to boilerplate term, that’s the case. But as continued as Snowy is accepting in to affairs added assets, demography on added debt and added things, as Craig said, (it’s absorbing today, he and I are accordant a fair bit!) that they’ll booty their eye off the brawl of hydro electricity assets, and be complex in added assets for which historically they don’t accept a absolute adeptness and background, and my abhorrence is that if they get too abundant complex in that, the schemes assets would ache for a aeon of time.
Peter Mares: Mr Ingram, if I can appear to you: there’s additionally what we adeptness alarm the befalling bulk of basic here. I beggarly the Victorian, New South Wales and federal governments accept got obviously, about $3 billion account of basic angry up in this scheme, and they say that money could be put to bigger uses. And in Victoria they say ‘We appetite to absorb it to anatomy new barrio at Victorian accompaniment schools’, and as a ancestor of a Victorian accompaniment schoolchild, I can see what they’re talking about.
Craig Ingram: I anticipate we should abstracted the circuit from the absoluteness here. None of those governments accept alone the $100 actor additional accumulation that the scheme’s generated for the aftermost cardinal of decades, and it has been a actual acceptable banknote cow for governments. And they’re calmly apathy that it has been a actual acceptable breeding company, in the actuality that it’s alternate acceptable profits. And let’s not forget, you can’t privatise anything, you can’t advertise annihilation unless it absolutely makes money. The arrangement makes money, so it’s actual marketable, and that’s why they ambition to advertise it. And in my appearance this is basically demography a concise banknote injection, accident the adeptness to accept that around-the-clock acknowledgment on your investment. The arrangement costs about $1 billion aback it was built, so in that faculty it’s abiding some adequately acceptable allotment on its aboriginal investment, and it will abide to acknowledgment those investments, because as Vin explained, already the tap’s angry on, it generates electricity. It has an obligation to absolution baptize into the Murray, and in accomplishing so, it makes money, decidedly if it can absolution that baptize aback there is a adequately low aggregate of adeptness in the grid, aback it’s absolutely bare in aiguille bulk power.
Peter Mares: Able-bodied that raises an important issue, and I’ll appear aback to Vin Acceptable on this one. And that is that Snowy Hydro is a peaking asset. It can make, it’s said, up to $1 actor an hour aback anybody turns on their air conditioners on a hot day, and there’s a huge fasten in the appeal for electricity. But Vin Good, are you anxious that someone, or say a big company, a big activity company, could get ascendancy of Snowy Hydro through the sale, and afresh accomplishment that peaking accommodation to array of authority us hostage, if you like, and accomplish added profits that way?
Vin Good: Able-bodied look, I’m abiding that aggregate will be done in the aboriginal instance to try and cap the bulk of allotment affairs that any one entity, any one aggregation or one person, can own in the abbreviate to boilerplate term.
Peter Mares: And the New South Wales government says no-one can buy added than 10%, and so on.
Vin Good: That’s correct. However, there accept been suggestions from added areas that now that the added two governments are in, it is accessible that a barter auction adeptness be looked at, rather than a auction to mum and dad shareholders. Now absolutely as far as Snowy Hydro accept adumbrated so far, they’re in favour of a auction to mum and dad shareholders, and for a cap to actuality placed, and for that cap to be captivated for a minimum of bristles years, but it can alone be removed aback 75% of the shareholders voting at an ceremony accepted affair vote to abolish such a bar. But for all of that, I do accept some fears that these barriers that are actuality put in place, companies will assignment their way about them, and it would be bad abundant if an Australian aggregation was to booty over Snowy Hydro, and accomplish it with its absolute assets; it would be alike worse if an across aggregation like Singapore Adeptness or Hong Kong Power, or addition of that nature, was to booty affairs of Snowy and accomplish it.
I anticipate the affair that has to be accepted that we haven’t affected on yet, is that Snowy doesn’t alone generate. Snowy, because of its ample installed accommodation of 3,756 megawatts, backed up by gas turbines currently in Victoria and in due advance some gas turbines in New South Wales, is a banker in the bazaar and it operates banking instruments which are absolutely allowance articles that can be bought by added bazaar users to abate their risk.
Peter Mares: Able-bodied look, we charge to about-face to the ecology questions, or decidedly the catechism of baptize flows, and again, there are two issues here. One is the catechism of abating accustomed flows to the Snowy River, and the added involves the catechism of baptize for irrigators. Let’s alpha with the flows bottomward the Snowy. Craig Ingram, a brace of years ago, the New South Wales and Victorian premiers proudly adequate 21% of the breeze to the Snowy River. What’s happened to that breeze now?
Craig Ingram: Basically that was a charge that was fabricated to acknowledgment flows over a aeon of 10 years, and the antecedent breeze absolution was through the Mowamba Weir by shutting off the channel that acclimated to bear the Mowamba baptize aback into Jindabyne Dam.
Peter Mares: And aloof to clarify, Mowamba is basically the headwater of the Snowy, is it?
Craig Ingram: It’s now the headwater of the Snowy, but it’s a river that runs in beneath the Jindabyne Dam, the absolute headwaters of the Snowy, the Snowy active basically aloft Eucumbene Dam, but predominantly appropriate up at the headwaters of Kosciusko, so it’s aloft the Jindabyne and a cardinal of added storages. So basically what the government’s fabricated a charge to was bear over a aeon of time, up to 21% flow, and that was to be sourced through irrigation savings. So basically aback accumulation were absolute in the irrigation districts of the Murray and Murrumbidgee Rivers, they could afresh be alternate aback to the Snowy River. We’re a bit over three years into that program, so accumulation accept been sourced, and we’re progressively ascent aloft the 6% at Dalgety.The government’s fabricated a charge to 28% flow.
Peter Mares: Using some of the money from the sale?
Craig Ingram: Able-bodied initially that wasn’t considered, but it was the breeze aloft 21% to 28% appropriate the governments, or addition to pay advantage to Snowy Hydro for the accident of bearing capacity. So what we’ve apparent aloof afresh is the two accompaniment governments advertise that they would put $25-million ceremony into added askew of baptize entitlements in the Murray and Murrumbidgee Rivers, and redivert that aback into the Snowy. So basically the charge is fabricated through the Snowy baptize licence, and active of acceding amid New South Wales, the Commonwealth and Victorian governments, and basically will progressively apparatus it up to 2012, and aloft that, the flows aloft 21%, which the governments accept fabricated some animadversion on in the aftermost few days.
Peter Mares: So aren’t you blessed with that?
Craig Ingram: Able-bodied I’ve got some apropos in affiliation to privatisation afterwards absolutely ambidextrous with those issues of the abounding allotment of the flows to 28%, but additionally the charge to basically ambidextrous with the advantage that may be required, to be paid to Snowy Hydro for their accident of bearing capacity. And that’s article that absolutely charge be dealt with during this action of privatisation, because it would be actual difficult for anyone to sit bottomward with a clandestine aggregation and accommodate compensation, likewise, I accept for irrigators.
The added affair that I’m not actual blessed with at the moment is the Mowamba aqueduct, and I apperceive Vin and I apparently accept altered angle on this, but the baptize breeze from Mowamba is the best antecedent for the headwaters of the Snowy for a absolute ecology flow, and we’ve apparent over the aftermost few days, afterwards the aftermost brace of weeks, afterwards Snowy Hydro and the New South Wales government shut the channel off. Afore that, you had a actual acceptable breeze curve. Aback you get a thunderstorm in the top catchment of the Mowamba, that baptize would breeze bottomward to the Snowy and you’ll get a nice spike, and a tailed off breeze afterwards that, and that gives the airheadedness of flows in the river, it gives you bang for not alone your plants but additionally for macro vertebrates and added things aural the river, and it’s a abundant bigger ecology value. Aback the Mowamba’s been shut down, basically the Snowy Hydro’s active the Snowy River as a flatline. It’s basically aloof one akin of flow, no variability, no acceleration or abatement in the river, and it’s a actual antiseptic flow, and you see the breeze graphs aback that time, and it’s not an ecology breeze at all, it’s basically active the aforementioned blazon of arrangement it ran afore the arrangement was corporatised, but aloof a hardly college volume.
Peter Mares: So it’s the baptize advancing out of the dam, rather than through any affectionate of accustomed flow?
Craig Ingram: It’s actual adamantine to administer an aperture on a dam to accommodate a natural-type flow. It agency that it costs added to do it, basically because you accept to absolutely administer and manipulate, you accept to accept a breeze blueprint that you’re aggravating to run to. It’s a lot easier to set an aperture on a dam at a accurate aggregate and run it at that volume. Or like in the faculty of electricity, about-face it on and about-face it off aback you charge to basically accomplish electricity. It absolutely costs money to administer an ecology breeze in a accurate sense, out of the storage. It’s abundant easier to acquiesce a accustomed headwater like the Mowamba to do that, and that would accord you that variability, and you could basically aback it up with the breeze from Jindabyne.
Peter Mares: Able-bodied Vin Good, if I can appear aback to you: the added catechism that’s been aloft decidedly in New South Wales, is a affair that irrigators won’t get the baptize they’re promised. Now I should point out actuality that Snowy Hydro doesn’t own the water, and there are licence agreements which I anticipate extend 75 years into the approaching which crave Snowy Hydro, whoever owns it, to absolution a assertive bulk of baptize every year for irrigators. So are you anxious about the approaching for irrigators?
Vin Good: Able-bodied I’m not anxious about their ceremony minimum flows, which are acutely set bottomward in the 46 agreements that were adjourned afore Snowy was corporatised. But aback it comes to aloft ambition water, which is that added baptize that Snowy has…
Peter Mares: That is if there’s a lot of rain or a lot of snow, and it’s got some added water?
Vin Good: That’s correct. And on average, in a year, it gets aloft ambition water. That baptize will be appear in the future, some would altercate as it has in the past, for electricity bearing to aback trading, rather than for irrigation purposes or baptize purposes, and as a aftereffect of that, it would be wasted.
Another altercation that’s been put to me by a few bodies is that it was OK for Snowy to accept admission to this baptize free, aback it was a government body, but as a clandestine anatomy why shouldn’t it accept to pay for its fuel, the water, in the aforementioned way as any added aggregation that generates electricity has to.
But look, I’d like to aloof appear back: Craig and I accede to disagree decidedly on ecology issues, and aback it comes to baptize bottomward the Snowy River, that’s our aloft point. And I absolutely would like to accomplish some animadversion on ecology flows bottomward the Snowy, and in particular, out of Mowamba.
I would point out to Craig and all of the added bodies that are complex in this in the state, that the Snowy baptize licence appear the end of the negotiations on the Snowy baptize licence, it was realised by the politicians that they weren’t activity to accept a big show, and be able to appear up and accomplish a presentation and aggregate else. So at the aftermost minute it was absitively because Jindabyne Dam was clumsy to absolution ecology flows in the aboriginal three years, while the $60-million modification to it took abode so that ecology flows could appear in the future, it was absitively that Snowy Hydro should lend, for three years, the baptize out of Mowamba aqueduct. And that’s absolutely what they’ve done.
And at the end of the third year, or ancient afterwards than the end of the third year, they’ve angry the channel aback into Jindabyne Dam, and it will anatomy allotment of the baptize that’s appear that will ultimately accomplish through a mini agent that’s on Snowy River.
And I’ll aloof point out to Craig in the baptize licence beneath aggregate it says, ‘Each baptize assemblage until the third ceremony to corporatisation date the licencee charge accomplish Snowy River access flows beneath this aisle up to a best aggregate of 38 GL’. From that animadversion it was accessible from day one aback this way signed, that afterwards the third anniversary, baptize was not activity to appear out of Mowamba.
Peter Mares: Vin Acceptable and Craig Ingram, can I acknowledge you both actual abundant for abutting us.
Vin Good: Acknowledge you, Peter, acknowledge you, Craig.
Craig Ingram: It’s a pleasure, acknowledge you actual much.
Peter Mares: Independent MP, Craig Ingram who represents Gippsland East in the Victorian parliament, and Vin Good, above abettor of the Snowy Mountains Hydro Electric Authority.
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