The 4350water Blog highlights some of the issues relating to proposals for potable reuse in Toowoomba and South East Qld. 4350water blog looks at related political issues as well.

Friday, April 17, 2009

Humphrey B. Bear takes control of BrisConnections ...

BrisConnections faces a nightmarish cash hunt for investors who have transferred their units into false names — including one who allegedly used the moniker "Humphrey B Bear".

Others have transferred units into the names of people living overseas.

All registered holders of BrisConnections units on April 22 must pay a $1 instalment to the company for every unit they own, due on April 29.

To avoid that payment a number of BrisConnections unit holders have used the off-market share transfer system to shift ownership into false names.

In November last year the Herald highlighted a serious flaw in the off-market transfer system that allows shares to be held in false names, by buying a share in a listed company in the name of a pet budgie named Mr Bud Gerigar.

See - Sydney Morning Herald - BrisCon forced into bear hunt.

Wonder if anyone transferred the units to "Anna Bligh" ...


Anonymous newswatch said...

Business Spectator:


Queensland Treasurer and Minister for Employment and Economic Development Andrew Fraser tells Business Spectator's Alan Kohler, Robert Gottliebsen and Stephen Bartholomeusz:

The government's first obligation in the context of BrisConnections is to the taxpayer
The state government has not been approached for a cash injection, but parties involved in BrisConnections have made propositions to secure additional value in the project

The broader reputation of banks involved in projects like BrisConnections will be affected by the decisions they make
He admits the state is facing revenue challenges from the downturn in the economy
If the Australian nation was a listed company, you "wouldn’t go near it"

Alan Kohler: Andrew, you’ve been taking a hard line so far saying that it’s up to the unit holders in BrisConnections to have got financial advice and it’s not up to you to get them off the hook, but are you really prepared to let the BrisConnections unit holders be bankrupted?

Andrew Fraser: Well, I think we need to be clear about the role of government and that is that, in this circumstance, government’s first obligation is to the taxpayer and we can’t confuse the obligations of government in that regard. We need to be clear about the fact that we secured an arrangement in the favour of the taxpayer and our role here through this process is to see those obligations honoured and have the interest of the taxpayer protected. To the extent that there are investors of whatever ilk and whatever size that have assumed risk in this proposition, then that’s a matter that needs to be sorted out commercially in the first instance, as I believe it will.

AK: Have you been approached by the underwriters to kick in some money to allow the thing to go ahead with perhaps the Queensland government owning some shares in BrisConnections?

AF: Well, we’ve not been approached for direct capital injections or to be part of any consortium, but obviously many of the parties involved in this arrangement have been approaching the government with various propositions which seek to secure additional value into the project. To the extent that those propositions all detract value from the taxpayer or come at the detriment to the community, then we haven’t been prepared to contemplate those requests.

Stephen Bartholomeusz: Andrew, you’re talking about things like traffic funnelling, aren’t you, to try and improve the economics of the project?

AF: Well, there’s a range of things and I think the banal statement that’s been reported at times in financial press over the last two weeks about “securing value for the project” needs to be understood that of course that means that the value’s coming from somewhere at the expense of someone and what’s been put forward to us in a range of circumstances are things that are to the detriment of the community or to the detriment of the taxpayer.

Robert Gottliebsen: Are you concerned that in a troubled world when most of the foreign bankers don’t want to put the money in, they may find a way to escape what was written in the contract?

AF: I think that’s a risk that arises in any circumstance even outside of the current broader economic environment and clearly there’s been a lot of commentary to that regard, but in the end I think it’s important, not just in a transactional sense but in a broader sense, for institutions to recognise that they have more at stake than just this transaction.

AK: You seem to believe that the project is not in the slightest bit at risk.

AF: Look, I think there is risk attached to the project. I think that’s been the case since day one. There’s risk in any project and obviously some of the risks have been heightened in relation to this project for a range of reasons and certainly some of those risks have almost crystallised in recent times and I think risk attaches to this into the future. That’s the nature of the project. The proper construction of all of this though is who’s assumed that risk and who’s best placed to deal with that risk and I think that those matters are clear.

SB: Andrew, a moment ago you seemed to be implying that if people don’t do the right thing by this project, then they mightn’t be doing business in Queensland again for a while.

AF: No, I wasn’t seeking to imply that. I was seeking to make the point that I believe that there is more at stake for the entities involved here than just what lies in any particular transaction involved in this project; that obviously for them they have corporate reputations which I presume are of considerable value to them and I think ultimately that those issues will drive the commercial outcome that I believe will be secured to see the project continue.

AK: By 'them', I presume you mean Macquarie Bank and Deutsche Bank.

AF: Amongst others.

AK: Well, who else?

AF: Well, I think that there are obviously a range of parties that have different roles to play. Macquarie and Deutsche have a particular role in the project and there are others who in sequence have a role to play in this project and I’m sure that everybody ultimately is keen to see that the balance between their at-risk investment, their at-risk exposure and what happens into the future is calibrated in a broader environment.

RG: Andrew, you’re talking about the foreign banks, aren’t you? That might well say 'look, we don’t want to be involved in this' and you’re almost saying to them 'look, if you don’t want to be involved in this, don’t back too many more Queensland resource projects in the next ten years'?

AF: Well, I think it’s fair to say that whether you’re a ultimately foreign bank, or a domestic bank, or another participant, that in business whether you’re involved in a project like this or whether you’re running a corner store, your broader reputation or goodwill for want of a better term is something that’s valid in your decisions about the way in which you act both in the short term and the longer term.

RG: Andrew, would you say that if BrisConnections had have been wound up, if that’s the way it turned out in that meeting, you would’ve been under a great deal more pressure to rescue the project? You’ve almost been let off the hook by that decision at that meeting.

AF: Well, Robert, I don’t want to particularly engage in the range of hypotheticals, because I think that there are obviously a number of issues and a number of events to transpire that obviously come into the future, but our position on this has been clear from the start and I suppose I’d make the direct point that I have been subjected to extensive and at times enthusiastic and robust arguments, propositions, persuasions and lobbying from folk keen to assume the risk in projects such as this, to have the government facilitate private sector investment in projects.

Ultimately, what’s being assumed here is the risk that enables both the ability to turn a profit, but also against that, the risk of realising a loss and if this was a situation – which is worth being explicit about – where the unit price tripled on listing and this was a bonanza for those both cornerstone investors and other investors who sought to participate post the listing, there would be high farce attached to a suggestion by me that because of the tripling of the unit price that the government should get access to some of that wealth creation. I think at the same time it is very clear that we’re not operating here in a position where, because the project has moved the other way, all of sudden the structure of projects such as this means that what’s only being transferred here is the opportunity for profit, not the risk of loss. I think to suggest otherwise is in fact disingenuous.

RG: I agree with that, but if the project itself was in jeopardy, then surely there would be a situation where the Queensland government's rules would’ve changed and you would’ve had to have come in. That’s not the case now.

AF: Well, I think that’s a plain fact, Robert. I would acknowledge that that’s been the broader circumstance attaching here for quite some time and I’m not sure that it’s completely dissipated.

RG: There’s still risk, do you think?

AF: Well, I think ultimately at this point there are still events to transpire, there are still milestones to be met and I don’t think anyone would suggest that there are no further elements of this particular event to transpire.

RG: Could we summarise your position in saying look, we won’t put taxpayers’ money simply at risk to improve the situation of various people, but if the project itself is at risk, we’ll consider what has to be done?

AF: Almost that, we’re not prepared to put in taxpayer money to otherwise dissipate the obligations that have been assumed, but secondly and ultimately whatever comes to pass, our interest here is having the road built and the infrastructure delivered and we’ll take necessary steps at that point, but ultimately obligations have been assumed and our position as a government is a very clear one and a very direct one, that those obligations should be honoured.

AK: But do you feel like you’re in some sort of game of brinkmanship here, that the only way that they’ll be able to get their hands on some of Queensland government money is to convincingly argue that the project won’t go ahead?

AF: Well, it’s been my experience through not only this, but other transactions that the commercial nature of these situations is one that’s always rather robust and best not negotiated through public fora.

SB: Andrew, if Macquarie and Deutsche, QIC maybe, and Capital were to effectively privatise BrisConnections by meeting the calls on behalf of all those small unit holders, is there any prospect that Queensland could then play a role because at that point you’re talking about a completely different structure and a recapitalisation?

AF: Well, as I said earlier, Stephen, I don’t want to go into every hypothetical, but I am happy to say that if there was a proposal similar to that, then the government wouldn’t seek to frustrate it. But ultimately that’s a matter for the parties to the arrangement at this point in time.

SB: When you were talking about the reputations of banks and others in this process, you’ve got a massive infrastructure program yourself of about $17 billion. Is that in some respect a carrot for people to do what they can to keep BrisConnections afloat?

AF: I think it’s broader than that honestly and that is that to the extent that there are participants who have very clear views, very strong views and clearly stated positions about wanting the opportunity to participate in infrastructure delivery, not just in the program we have at any one point in time but more broadly, that there needs to be recognition.

I think that this is not a one-way street where the taxpayer only ever transfers the opportunity for profit realisation, but never in fact transfers the risk of realising the loss and I think ultimately that’s an aspect to this debate which is much broader than the current circumstance, but one that’s worthy probably of a bit more robust public debate at this point in time. I think it’s an issue that obviously is enlivened by the nature of the fact that there are retail investors involved in this circumstance. What would be a slightly different debate, I think it’s fair to say, would be a circumstance where there weren’t retail investors involved and some of those issues would be in sharper relief rather than the debate being conducted through the prism of the retail investors. I think ultimately here we need to remember that the interests of all investors align on this front.

AK: Just on the subject of traffic funnelling, I mean clearly the whole things arises because the project turns out to be much less attractive to investors than originally thought. Is your position that you did a deal on the traffic with the promoters of the project and that’s it and there’ll never be any change?

AF: Yes, it is because it has to be. I think it would be a ludicrous situation for it to be otherwise. Clearly the proponents had a view about those models. The market’s taken a different view at this point in time. What actually comes to pass upon construction is obviously something that’s an unknown at this point and the market’s making a judgement about it. That’s the essence of the risk that was assumed in this project.

AK: I was driving through Brisbane last week and it’s an absolute nightmare. I mean I would’ve thought that the airport to city road is just the beginning of what you have to do to fix the roads of Brisbane. Is that a fair comment?

AF: I think it’s broader than road issues and certainly with the population growth that we’ve experienced obviously there is a lot of investment going into road infrastructure in the southeast corner not just in Brisbane, but on the growing Sunshine and Gold Coasts, but equal to that is the investment into public transport and into the network of bus ways. After all, it’s important to remember that a key part of the overall airport link project is in fact the DNC contract on the northern bus way, which is worth more than $400 million, providing for a public transport corridor through the northern suburbs being built at the same time as Airport Link and it’s all of those infrastructure projects together which are important.

AK: One way to look at all this is that the Labor government failed to properly create the right infrastructure in Brisbane for public transport and transport generally and now the first big effort to fix that with the airport toll way has also turned into an absolute mess.

AF: I suppose I’d say two things, Alan. One is that Airport Link is by no means the first effort. There’s a Gateway Bridge duplication that’s about two-thirds built, if I look out my window, which is $1.8 billion on the national highway being built by the Queensland government because frankly for the last ten years we’ve been in the circumstance in this country where we’ve had a federal government that’s been absent to field on those sorts of investments.

If you want a pretty stark example of that, then you can take a look at a two-thirds built $1.8 billion duplicated Gateway Bridge. At the same time, there’s the Houghton Highway duplication out to Redcliff, there’s the extension from Darrah to Springfield which is both a road and public transport corridor; the extension of the rail line on the Gold Coast.

These are projects which have all been underway for some time. What you know about these things also is that from a twinkle in an engineer’s eye to bulldozers turning dirt is a period of time and if you take a drive around Brisbane as you indicated you were, then you would’ve noticed the abundance of construction sites all of which haven’t just arrived in the last five minutes, all of which have been underway for some years now. That’s the nature of the projects being undertaken.

RG: Andrew, the investor area has a lot of focus on BrisConnections, but probably the greatest sort of mum and dad investment in Queensland is on the Gold Coast – leaving out resource projects and things of that sort – and that’s one of the hardest hit real estate areas of Australia. What are you doing about the Gold Coast market and is there any light there?

AF: Well, the Gold Coast is an important city. It’s Queensland’s second biggest city, it’s the largest regional city outside of a capital city in the country and its economy is particularly fuelled by tourism and services based industries. It’s also got a very significant construction industry and it’s in fact been the growth of the Gold Coast that’s been a driver of its recent growth in almost a self-perpetuating way.

So, what’s important on the Gold Coast at the moment is providing for those capital works projects. In the election campaign one particular project – albeit rather small in comparison with the $1.5 billion Gold Coast University Hospital which is being built at the moment – was the contribution we are making with the AFL to build a stadium, obviously that’s about not only the construction of that project and what that does in an immediate sense, but what it brings in terms of visitors to the Gold Coast and anyone who’s ever been on the Gold Coast knows that unless people are walking through the doors of the shops and the cafes and the tourist ventures on the Gold Coast, then the Gold Coast economy doesn’t spin as well as it needs to and we need to make sure that the tourism attraction of the Gold Coast which lies at the core of its prosperity is maintained.

SB: Andrew, you have been hit by the recession and the effect it has on tourism and I suppose the impact it's had on the resources sector, because they would be, I assume, the two bigger elements of your economy. You’ve lost something like $12 billion of revenue as a result of all this. What’s that done to your fiscal position and in particular that program that you started outlining of major capital works?

AF: Well, obviously like all governments around the world, we’re facing revenue challenges from the downturn in the economy. I think for states in particular – and this is an aspect of the public debate which hasn’t been as well advanced as it might have been – that the nature of the debate about federal / state financial relations is particularly relevant at this point in time. I’ve long held the view that the nature of federalism in this nation needs to be addressed and that’s ultimately about the nature of the obligations to provide services and the tax base open to levels of government in this country.

We do have an imbalance there that is especially high and one of the effects of that is the narrowness of every state’s tax base means that they’re particularly vulnerable to changes in the economy, that don’t necessarily have to be as broad-based as what we’ve seen. Changes in a property market, and for some states, changes in the resources sector can have very disproportionate results on the overall fiscal outlook for a state based on those swings and so ultimately here there’s a debate which was started at a different time which I think is vitally important about how we design the financing of the federation into the future. That debate just got a whole lot harder because of current circumstances, but it got no less important.

AK: The National Australia Bank business survey that came out this week, it’s a monthly survey, showed Queensland business conditions are the worst in the country. I presume that’s got a bit to do with what Stephen was talking about; the fact that you rely so much on tourism and resources. How are you seeing the business conditions in Queensland and is there anything you can do about it?

AF: Well, I think ultimately if you look at the performance of the Queensland economy over the last decade, each and every year we’ve outpaced the nation and what’s contributed to that is a government that’s seen its role in the first instance of providing for a competitive business environment, to seek to pursue a broad-based competitive environment in so far as having competitive tax arrangements, the lowest payroll tax rate in the nation, very competitive on Workcover, very competitive on land tax and other issues which are important to business investment decisions and also pursuing the advancement of particular industries to broaden the economic base in the state. I think that the modern Queensland is a very different beast from where it was a generation ago and ultimately our role here is to keep those broad-based settings in place, but also seek to provide the opportunity for new investment here in Queensland and that’s been the hallmark of what we’ve done over the last ten years and it will continue into the future.

SB: Andrew, one of the other flow-on issues from the global financial crisis has been the impact it’s had on banks and in your case I suppose the regional banks – you’ve got Suncorp and you’ve got Bank of Queensland who are having real trouble funding themselves. Is there anything you can do to help your regional banks because quite clearly the regionals, without some sort of assistance, are just going to wither?

AF: Well, it’s obviously been a matter of public record and public debate that in this context regional banks have found themselves both – and it’s important to recognise this – prior to the institution of the guarantee and post to the institution of the guarantee, in a difficult position. Obviously that has particular effects for the markets in which they operate, not only geographic markets but also the sectors of the economy in which they operate. To the extent that there are particular exposures, for instance, in property development, then the nature or the confluence of a range of events are providing particular pressures in particular markets and I think that’s certainly the case in the southeast corner at the moment. I’m pretty wary as a rule of the notion that as a state government we have an active role to play that goes beyond the broader recognition of those difficulties.

RG: Would you consider pressing the Reserve Bank and the government to change the guarantee rules to help beat Queensland banks, given the effect that you do believe it’s having on the southeast corner of Queensland?

AF: Look, it’s been my view from the start that the institution of the guarantee was absolutely the right thing to do and I think if you look back at some of the commentary pre and post – and especially immediately post – then a lot of the statements made by participants at the time about what they thought would happen hasn’t come to pass and I think one of the things that we should comfort ourselves with as a nation at this point in time is the debate we’re having about the nature of our financial system at this point in time is very much one that is at the margins compared with the sorts of debates that most other nations have had. Ultimately that stands us in very good stead as we move out of the current phase that we’re in, that we’re not in a position where we’ve had to significantly recapitalise our banks or provide for the public assumption of the obligations that reside within our financial institutions. Surely that will place us in a very envious position as the economy moves back to a normalised path.

SB: Is there a market-based reason though - and I’ve got no doubt there’s been a lot of discussion about the closure of the securitised debt markets - is there a role that governments could play to reopen those so that the regionals do have a competitive source of funding?

AF: Look, I think ultimately we need to be mindful of the fact that any government intervention at this point provides with it very long tail consequences and the point I was making earlier goes directly to that point and that is we should be wary at every point in time of government moving too far down that path lest it visit upon itself great difficulty in seeking to walk back down that path at a future point in time and one of the great strengths of our nation at this point in time is that we’ve been in a position where we’re fortunate enough not to have gone too far down that path.

RG: Can I just take you back to that broader discussion we had about the role of financing of the states and the Commonwealth. Is there a risk that what we’re going to see as we pursue that debate that we have a much more centralised financial system with rather a minor role for the states? Do you think that’s a possible outcome?

AF: Well, I think the history of federations shows that they operate to always, through time, transfer power from the constituent parts into a centre. What’s useful, I think in a nation like ours, is to have the debate about where in fact those particular powers and obligations reside. I’ve said before and I’m happy to repeat again, I think if the Australian nation was a listed company, you wouldn’t go near it because nowhere would you ever contemplate investing in a corporate structure where the revenue streams and cost centres were so fundamentally out of alignment. Ultimately, it’s a structural inefficiency.

You can overcome that to an extent and it’s not fatal and it’s certainly not a major problem at the margins, but to the extent that is moves beyond an adjustment of balance into being something that is an impediment to the proper functioning of government, then I think that there is a much broader debate to be had and that’s not necessarily about changing the nature of the tax base at any level of government, that’s about aligning the obligation for service delivery with revenue capacity because to the extent that you have an imbalance between those two, then you get great potential for perverse policy outcomes and for structural inefficiency.

1:00 PM, April 17, 2009


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