MEET WA’S $319.5 million man.Last year, independent MP Mark Nevill, who holds the balance of power in the Legislative Council, cast his deciding vote in favour of the sale of AlintaGas.
MEET WA’S $319.5 million man.
Last year, independent MP Mark Nevill, who holds the balance of power in the Legislative Council, cast his deciding vote in favour of the sale of AlintaGas.
Last week the Government announced the diversified consortium Utilicorp United Inc and United Energy Limited had successfully bid $319.5 million for the right to become the 45 per cent shareholder and cornerstone investor in the soon-to-be-sold utility.
This week Business News asked Mr Nevill for his view on the sale. Despite some reservations – and regrets – he gave it the thumbs up.
“AlintaGas was a wasting asset because of deregulation, so the sooner it was sold the better,” said Mr Nevill.
“In the first 18 months of de-regulation AlintaGas lost 20 per cent of its industrial customers and, if it is going to hold its remaining large customers, it is going to have to drop its prices dramatically.
“If the government had sold two years ago before deregulation it probably would have got about $500 million. If it had sold two years from now it would have got much less than $319 million.”
De-regulation of WA’s gas market began on January 1, 1998 when all gas customers taking at least 250 terajoules per year were classed as contestable.
The contestable threshold fell to 100TJ on January 1 this year, will drop to 1TJ on January 1 2002, and the market will be completely deregulated six months later.
According to AlintaGas, about 20 of its customers account for 75 per cent of its gas sales by volume. Business and industry generally account for 87 per cent and residential sales for the remaining 13 per cent.
“AlintaGas traditionally makes a small loss on the domestic or residential market, which is cross-subsidised by the industrial market,” Mr Nevill said.
“We now have a competition policy to allow private operators to target the most lucrative contracts AlintaGas has. I have heard that one of its very large customers in the Canning Vale industrial estate has had its delivered gas cost reduced by 50 per cent thanks to that competition.
“AlintaGas profit deteriorated last year and it was my view that the trend would continue under government ownership.
“United Energy is a good choice for the new operator. It has done a good job in Victoria, bringing in new efficiencies and cutting the number of days of power outage.
“It is also a very Australianized American operator having kept the Australian management"