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.