ONE of the first orders of business for the soon-to-be privatized AlintaGas will be to sort out its gas transmission bill.
ONE of the first orders of business for the soon-to-be privatized AlintaGas will be to sort out its gas transmission bill.
Since January 1 Epic Energy, the owner of the Dampier to Bunbury natural gas pipeline (DBNGP) has been billing the state’s biggest gas utility $1.18 for every gigajoule of energy transmitted.
AlintaGas, however, is paying only $1 a gigajoule. The total amount in dispute is growing at the rate of about $780,000 a month according to the utility’s public offer document which is still subject to amendment after going through its requisite one-week public “exposure” period last week.
However, the utility’s CEO, Phil Harvey, was not too concerned when quizzed about the issue last week by Business News.
“We think $1 a gigajoule is what we legally have to pay,” Mr Harvey said.
“That is an issue we need to resolve between us and I am confident we can resolve that by negotiation.”
Business News spoke to Mr Harvey after he had addressed a packed business luncheon about the utility’s financial performance since it was established as a separate entity on January 1, 1995.
During the address, Mr Harvey admitted AlintaGas would have been a poor candidate for privatisation in 1995. It “was not in an outstanding financial position” then, with a large debt in its books and a profit after tax of a mere $4 million.
Since then the utility had “come a long way”, having outsourced many of its activities, struck up new relationships with gas installers and retailers, renegotiated its take-or-pay arrangement with its major supplier, and adopted industry best practice throughout its business.
“I’m not going to dwell on the profit position except to say that in the financial year just finished our EBITDAR (earnings before income tax, depreciation and amortisation) was about $96 million compared to the previous financial year when it was about $70 million,” Mr Harvey said.
“Customer numbers have increased from about 350,000 to 420,000 and we have extended into Kalgoorlie where we won the right to distribute and reticulate gas against other private sector companies.
“In Albany we have increased the capacity of the (distribution system) by about four times.
“So in summary I think the organisation has been turned around to the point where it is now ready for private ownership and I have to say it was probably not in 1995.”
According to AlintaGas’ submissions to the independent Gas Access Regulator, the access arrangement put forward by DBNGP’s owner, Epic Energy, is fundamentally flawed and could double its costs.
In response to questions from Business News, Mr Harvey said the decision would have no impact on the current price AlintaGas is paying.
He also believed the decision on the access arrangement could go either way.
“The Regulator will come down with a figure that could be anywhere in the range of a $1 up to even higher than $1.18,” Mr Harvey said.
“(However), we have made submissions setting out why we believe the price should be down closer to 85 cents.
“What the Board has said – and the Board has to sign off on the public offer document – is that the element of risk involved in (the decision) is only of the same order of risks as several other risks that our business faces.
“For example we face a weather risk every year. If we have a cold winter or a warm winter, it makes a significant difference to our revenue. We have an exposure to Wesfarmers LPG plant, if LPG prices are high we get a lot of revenue sharing, if they are low we get a low sharing.
“So when you look at the totality of risks that are involved – interest rates are another one – the Board takes the view that the amount of risk involved in the Dampier to Bunbury pipeline decision is no greater or less than all the other risks we face.”
Since January 1 Epic Energy, the owner of the Dampier to Bunbury natural gas pipeline (DBNGP) has been billing the state’s biggest gas utility $1.18 for every gigajoule of energy transmitted.
AlintaGas, however, is paying only $1 a gigajoule. The total amount in dispute is growing at the rate of about $780,000 a month according to the utility’s public offer document which is still subject to amendment after going through its requisite one-week public “exposure” period last week.
However, the utility’s CEO, Phil Harvey, was not too concerned when quizzed about the issue last week by Business News.
“We think $1 a gigajoule is what we legally have to pay,” Mr Harvey said.
“That is an issue we need to resolve between us and I am confident we can resolve that by negotiation.”
Business News spoke to Mr Harvey after he had addressed a packed business luncheon about the utility’s financial performance since it was established as a separate entity on January 1, 1995.
During the address, Mr Harvey admitted AlintaGas would have been a poor candidate for privatisation in 1995. It “was not in an outstanding financial position” then, with a large debt in its books and a profit after tax of a mere $4 million.
Since then the utility had “come a long way”, having outsourced many of its activities, struck up new relationships with gas installers and retailers, renegotiated its take-or-pay arrangement with its major supplier, and adopted industry best practice throughout its business.
“I’m not going to dwell on the profit position except to say that in the financial year just finished our EBITDAR (earnings before income tax, depreciation and amortisation) was about $96 million compared to the previous financial year when it was about $70 million,” Mr Harvey said.
“Customer numbers have increased from about 350,000 to 420,000 and we have extended into Kalgoorlie where we won the right to distribute and reticulate gas against other private sector companies.
“In Albany we have increased the capacity of the (distribution system) by about four times.
“So in summary I think the organisation has been turned around to the point where it is now ready for private ownership and I have to say it was probably not in 1995.”
According to AlintaGas’ submissions to the independent Gas Access Regulator, the access arrangement put forward by DBNGP’s owner, Epic Energy, is fundamentally flawed and could double its costs.
In response to questions from Business News, Mr Harvey said the decision would have no impact on the current price AlintaGas is paying.
He also believed the decision on the access arrangement could go either way.
“The Regulator will come down with a figure that could be anywhere in the range of a $1 up to even higher than $1.18,” Mr Harvey said.
“(However), we have made submissions setting out why we believe the price should be down closer to 85 cents.
“What the Board has said – and the Board has to sign off on the public offer document – is that the element of risk involved in (the decision) is only of the same order of risks as several other risks that our business faces.
“For example we face a weather risk every year. If we have a cold winter or a warm winter, it makes a significant difference to our revenue. We have an exposure to Wesfarmers LPG plant, if LPG prices are high we get a lot of revenue sharing, if they are low we get a low sharing.
“So when you look at the totality of risks that are involved – interest rates are another one – the Board takes the view that the amount of risk involved in the Dampier to Bunbury pipeline decision is no greater or less than all the other risks we face.”
