22/07/2014 - 15:24

Synergy savings revealed amid board shake up

22/07/2014 - 15:24

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Departing Synergy board member Keith Spence has told Business News the merger of Synergy and Verve had already delivered $70 million in savings.

Synergy savings revealed amid board shake up
Keith Spence has left as a director of the Synergy board. Photo: Attila Csaszar

Departing Synergy board member Keith Spence has told Business News the merger of Synergy and Verve had already delivered $70 million in savings.

The news came a day after the Barnett government confirmed former Woodside Petroleum executive Mr Spence, along with fellow independent board members Margaret Seares and Eric Hooper, had resigned from Synergy earlier this month.

In addition, chairman Michael Smith also resigned from the board, leaving only two remaining board members.

The early release of news of the $70 million already saved under the Synergy-Verve merger followed an exclusive report in Business News in May that Western Australians would be waiting until Christmas to officially find out how much the January merger of the electricity retailer and generator had saved. 

Explaining his decision to leave the board, Mr Spence cited a proposal to install a new full-time executive chairman as the crucial factor.

Mr Spence told Business News he viewed Energy Minister Mike Nahan’s plan for the board restructure as a vote of no confidence in the chairman, who was doing a good job.

“You look at what’s been achieved in the time frame; it’s been a very smooth transition, we’ve captured savings, we’re working on strategy, a lot of the people issues had been addressed, the organisational culture was coming together really well,” Mr Spence said.

“There was in excess of $70 million in year-on-year savings already captured from the (Synergy-Verve) merger, which was way in excess of what was planned.”

Mr Spence said Dr Nahan’s decision to pursue a new governance structure, which he has since amended, had taken him by surprise.

“Basically the minister, out of the blue, proposed a change in structure in appointing an executive chairman,” he said.

“Trust was breached, so it was not really sustainable to stay.”

In a statement, Dr Nahan said he approached Mr Smith with the idea of appointing an executive chairman, but Mr Smith strongly recommended against it.

“As a result of his advice, I have decided not to pursue an executive chairman for the business. We are, however, considering a full-time non-executive chairman,” he said.

Dr Nahan said he would make an announcement in the coming weeks about a new chairman and replacement board members.

He said he had previously withheld discussing the other board members’ resignations as he had hoped to address it when he announced a new team.

Mr Spence said while the board had made headway following initial challenges resulting from rolling out the merger, he and his colleagues’ decision to leave was also due to conflict with other board members.

“The board was being dysfunctional,” he said.

Business News has sought comment from others who served on the board, including remaining board members McRae Investments consultant Michael Goddard and ACIL Allen Consulting director Mark Chatfield.

Mr Spence said while the board had been considering all options for Synergy, including turning it into two separate ‘gentailers’, he believed Dr Nahan may have been influenced by wanting to accelerate that process.

“I think part of his reason for putting in an executive chairman was he was partly pre-empting what he thought was going to come out of the review, which is basically he wanted to accelerate a sale process around synergy,” Mr Spence told Business News.

“He’s very keen on creating two gentailers, and selling them.”

Dr Nahan is on the record supporting such a move, but Premier Colin Barnett has publicly rejected this idea.

However Dr Nahan denied the assertion he wanted a new chairman so he could rush through any agenda.

“I am not trying to pre-empt the (wholesale electricity market) review,” he said.

“The reason for a full-time chair is the business faces a number of strategic challenges in the coming months.

“A full-time chairman will be necessary to help deal with these strategic issues. Mike Smith was not available on a full-time basis.”   

Meanwhile, the ongoing expansive review of the state’s wholesale electricity market has quietly fallen behind schedule.

A discussion paper relating to the issues facing the electricity market and reform options and the opening of public submissions was due to be released last month.

A spokesman for Dr Nahan’s office rejected claims of political or policy issues causing the delay, saying the discussion paper should be out by the end of this month.

Electricity generators ERM Power and Bluewaters Power declined to comment on the delay.

Alinta and Perth Energy said the delay so far was not causing them concern. 

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