Banks under fire

ALINTA managing director Bob Browning has accused the banking syndicate that controlled the protracted sale of the Dampier to Bunbury natural gas pipeline of “holding the State to ransom”.

Many business people have privately criticised the banks but it is rare for a senior executive to publicly attack their behaviour.

“The banks greased their way right through this thing without really taking a lot of flak,” Mr Browning told WA Business News.

“They held this State to ransom, they absolutely did, they had their foot on the hose,” he said.

The banks played a central role in the sale of the Dampier pipeline, after its former owner Epic Energy ran into financial problems.

Epic originally tried to sell the pipeline in 2003 and its 28-member banking syndicate, led by National Australia Bank and Deutsche Bank, formally took control of the sale last March by appointing receivers and managers.

The financial imbroglio surrounding the pipeline meant much-needed capacity expansions did not occur and Alinta, which was keen to secure extra gas supplies for its own business, was concerned this stalemate could continue.

“The banks were really clear,” Mr Browning said.

“They said we are not going to allow any more expansion, we want 100 cents in the dollar on our debt and if you guys don’t do that we’ll put it into liquidation, so they were really holding the State to ransom.”

The saga was resolved last October when a consortium including Alinta and Alcoa paid $1.86 billion for the pipeline, allow-ing the banks to be repaid in full.

Mr Browning said the WA Government’s $88 million assistance package enabled the winning consortium to increase its bid “to some degree”.

“The thing ended up selling for $1.86 billion and so $100 million of that or thereabouts was from the stamp duty, so it got us from 1.76 to 1.86.”

The government assistance was in the form of a long-term loan converting to a grant, and was contingent on the successful bidder committing to a capacity expansion.

It also helped to progress the sale process, since the assistance was effectively a refund of the stamp duty paid by the winning consortium.

Opposition leader Colin Barnett has criticised the assistance package, saying the money went straight to the banks rather than into the pipeline expansion.

“What are we doing, as Western Australian taxpayers, baling out a consortium of 30 or 40 US banks because they, probably, didn’t do proper due diligence when they backed Epic’s purchase,” Mr Barnett said.

Mr Browning, like many business people who have spoken privately to WA Business News, said he believed the government acted appropriately in difficult circumstances.

“I have to applaud the government. They made a difficult decision in order to facilitate a sale ... that is very important to industrial development in this State.”

He said he believed criticism should be directed to the banks.

“It was the banks that put everybody in this situation,” Mr Browning said. “The banks just took their money and went home and got away with it.”