Curtis Pitt
July 10, 2015
The State Government announced today it will cut $4.1 billion off the State’s forecast $80 billion debt by shifting it on to the balance sheets of government-owned electricity network companies.
Treasurer Curtis Pitt said the measures, which will be included in next week’s State Budget, will put the network businesses’ capital structure on more commercial terms.
The change will return capital to the State Government and reduce interest payments on government debt by approximately $600 million over the forward estimates.
The three businesses – Ergon, Energex and Powerlink – are currently geared at an average debt-to-asset ratio of 55 per cent, but private sector power companies have an average gearing ratio of 80 per cent.
Ergon and Energex will be given a new target gearing ratio of 70 per cent and Powerlink, 75 per cent.
“The funds returned to government as a result of the re-gearing will be used to reduce general government debt,” Mr Pitt said.
“The people of Queensland supported Labor’s plan to keep these businesses in public ownership to deliver better outcomes for Queensland taxpayers.
“With the assets firmly staying in public hands, we need to get them operating more efficiently and making the State’s investments work harder for Queenslanders.”
Mr Pitt said the network businesses had self-sustaining debt and the new gearing ratios had been set after consideration of their future operating and capital expenditure requirements.
“This includes the recent changes to revenue allowances announced by the Australian Energy Regulator to ensure they continue to provide safe, reliable, secure and cost-effective electricity supply services to consumers,” he said.
Mr Pitt said there would be no impact on electricity transmission and distribution charges, as these were independently regulated by the Australian Energy Regulator. There would also be no forced redundancies because of the measures.
The re-gearing plan was recommended by Queensland Treasury in its Independent Review of State Finances, to be released with the Budget.
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Shadow Treasurer John-Paul Langbroek today described the proposal as a sneaky debt swap, which would end up costing Queenslanders more.
He said the debt shuffle strategy “proved the government was out of ideas and couldn’t deliver its election promises”.
“This was never part of Labor’s pre-election fiscal strategy. Voters have been duped,” Mr Langbroek said.
“The Treasurer’s so-called solution to pay down debt is to merely put it in a different place, saddling the government-owned businesses with even more ‘dead debt’.
“This is not debt these businesses can invest to grow or provide a return, this is ‘dead debt’ which is the result of a decade of deficits from previous Labor Governments.
“Burdening them with ‘dead debt’ could affect their commercial viability, leaving Queenslanders to pick up the tab to keep them solvent, as was the case only a few years ago with CS Energy.”
Mr Langbroek said the debt swap proposal would not reduce the State’s overall debt, and would have no impact on Queensland’s credit rating.
Shadow Energy Minister Andrew Powell said Mr Pitt was relying on the revenues from government businesses to pay down debt, but was shackling them with increasing debt costs.
“His plan today sees them faced with rising debt costs, and at the same time the national regulator has decreased the revenues these businesses are allowed to recover from customers,” Mr Powell said.
“This means the energy companies will need to find other ways to cover their newfound debt, which will ultimately leave Queenslanders worse off.”
