State Asks Utilities To Repay $80m Loan
Sydney Morning Herald
Tuesday June 8, 1993
The NSW Government has ordered Prospect, Shortland and Illawarra Electricity to repay immediately more than $80 million in loans not officially due until 2000 in a pre-Budget bid to bolster the State's finances.
The former Minister for Finance, Mr Souris, wrote to all three electricity utilities early last month asking them to repay the funds early to the State Treasury.
The money was originally borrowed nearly three years ago in a bid to slash the Electricity Commission's debt levels through the forced sale of the 132kV transmission system to the three utilities. The loans were taken out over 15 years at no interest.
The State Government has now offered a refinancing deal through Treasury Corp on terms which will allow the utilities to pay off the debt over a longer period and at no extra cost.
A government spokesman said last night that the move was a routine offer aimed at giving county councils the benefit of T-Corp's triple A credit rating and refinance on better terms.
But according to the Opposition, the order is a thinly disguised pre-Budget raid and represents a further sign of the State's "desperate financial position".
The Opposition spokesman on energy, Mr Pat Rogan, said the Minister for Finance had called on the utilities to refinance their loans and repay them early so the funds could be placed in the Treasury to prop up the Budget.
"Quite clearly there is a giant hole in the Budget," Mr Rogan said. "This is money the Government is desperate to grab from the electricity distribution authorities and is clearly designed to fill the financial hole. They are trying to get money from wherever they can.
"The $43 million repayment for Prospect Electricity alone comes on top of the $42.5 million it was required to pay to the Electricity Development Fund in the form of a dividend payment, together with a $75 million special dividend the State Government last month directed Prospect to pay into the Budget. That is a cool $160 million ripped out of Prospect alone."
The State Government's order to the utilities is reminiscent of the request by the former Premier, Mr Greiner, in 1991 which forced the Electricity Commission to repay early a $400 million loan to the Treasury.
At the time, Mr Greiner defended his action as "a perfectly correct, appropriate thing to do". He said the commission was simply repaying an old loan which it had taken out through the Treasury and was borrowing another$400 million at a slightly lower interest rate, saving the taxpayers about $7 million.
However Mr Greiner did not, at the time, highlight that the Treasury did not use the $400 million to repay the loan it had taken out originally on the commission's behalf but used it instead to prop up the Budget.
Mr Rogan said that in addition, the Government was clearly building up the Electricity Development Fund (EDF) - where dividends, contributions and interest payments are placed - in readiness for Treasury to close the account and redirect funds to consolidated revenue.
"Clearly, the Government is in the process of fattening up the EDF to slaughter it so Treasury can feast on electricity consumers' funds," he said.
"It is now obvious that these desperate measures show that the State Budget is in bigger trouble than the Government is prepared to admit."
Last night, the chairman of Prospect Electricity, Mr Jim Morris, said the deal worked for Prospect but "it's clear it's a move to bolster NSW finances"
© 1993 Sydney Morning Herald