Hydro Tasmania's Basslink stoush

If force majeure is the reason for the Basslink outage then maybe Hydro Tasmania owes Basslink for the six months when the interconnector was being repaired?

Tas Water & Councils: The broader picture

The previous blog had a closer look at Tas Water’s cash flow statements to show how Tas Water is managing to fund its capital programs with a mixture of operating cash and borrowings and how the distributions to owner councils each year require even more borrowings.

So what is the situation with councils?

Tas Water's cash flows in detail

This is the third in a series of blogs on Tas Water.

The Tas Water saga is yet another example of our inability to solve simple problems. It has quickly degenerated into a political imbroglio where the issues that lay at the heart of the problem are quickly forgotten. This blog will attempt to redress the imbalance.

Tas Water: Where's the money coming from?

Where’s the money coming from?

That’s the problem facing Tas Water irrespective of who might be running it.

For starters there’s $2.5 billion of surplus cash sitting on Tascorp’s balance sheet earning 2.6%.

Tas Water's problems

One doesn’t need Nostradamus’ foresight to realise that borrowing to pay dividends is unsustainable. Especially if the business urgently needs to spend more on capital upgrades.

Tas Water’s 2016 financial statements are an eye opener. An extra $65 million was borrowed during the year, $20 million of which went to councils as dividends in addition to other distributions of $10 million. The rest was needed to fund extra capital spending which coincided with a fall in net operating cash. Another year or two like that and the undertakers would be placed on standby. Treasurer Gutwein’s concerns about Tas Water aren’t without foundation.

Gaming inquiry update

The parliamentary committee investigating Future Gaming Markets has received written submissions and has held five days of hearings.  Only a few witnesses ventured into accounting and economic aspects of gaming and this happened on the 7^th and 8^th February. The questioning by the Committee was pretty low key. It seemed they were struggling with the issues, not surprising given the enormity of the task in an area unfamiliar to all of them. This note was written in response to the Committee’s offer to accept comments from me that may assist in their deliberations following my brief appearance on the 8^th February.

The submissions and appearances of interest  (submissions and transcripts can can be found here ) were from:

·       Australian Leisure and Hospitality Group, the largest pokie operator in Australia associated with Woolworths

·       Dixon Hotel Group, a local group with 35 hotels (not all pokie pubs)

·       Tasmanian Hospitality Association

·       Tourism Industry Council Tasmania

·       Federal Hotels

One  area where no progress was made was trying to understand the costs associated with pokies at the venue level and at the network level. Each face different costs some fixed and some variable. It is crucial to understand the differences if pokies are allowed to survive outside casinos,and a more equitable split is to be recommended between the network operator, the venue, players and government. The note concludes with an Econ 101 presentation setting out costs and revenue for network and venue operator(s) before and after possible changes.