Tuesday, June 27, 2006

How Brisbane Stole Queenslands Dams

Many would be intrigued to learn that the Brisbane water supply was paid for by all Queenslanders but those outside greater Brisbane have had their share sold off in a classic "asset stripping" operation.

Wivenhoe Dam cost about $400 million in 1985 and each Queenslander owned a portion of it. But the state government then sold off all but 10% of it to Brisbane City Council and the adjoining LGAs in 2000. And they threw in Somerset and North Pine Dams at no cost.

The price that the city paid for this asset owned by all Queenslanders was the same $400 million it cost in 1985. This price was calculated solely on the basis of profits being earned on this investment, as determined by the Department of Natural Resources. There was, and still is, no charge for the considerable flood mitigation benefits enjoyed by much of Brisbane despite the fact that this was the main reason for building the dam in the first place.

But the moment Lord Jim Soorley gained control of the entity the wholesale price that was charged to the council customers (also the new owners) was increased from $120 per megalitre to $170/ML. And all of this price increase was added to the net profit figure and this meant that the value of the entity was closer to $1 billion rather than the historical $400 million.

If each flood prone house or cashed up CBD corporate paid a modest amount for the insurance value of the Dams under proper user pays principles then the value of the entity would be closer to $1.5 billion. Yet, the public officers who did the original valuations were closely involved in the running of the water system before the sale and, should have been aware that there had been no wholesale price increases for many years. And the potential for future price increases should have been a major factor in determining a fair price to pay Queenslanders outside Brisbane for their share of their dam.

So each non-Brisbane Queenslander got paid only $117 for their share in the dam that was really worth $440 while each of the 1.5 million residents of greater Brisbane now have an asset worth $1,000 that they only paid $266 for.

This transaction was referred to the ASIC but no action was taken and no grounds for that decision were provided. But one can't help wondering if the current lack of rain in the Dam catchment is the revenge of the gods for some very sleazy karma.


At July 05, 2006 11:52 am, Blogger Ian Mott said...

It is worth noting that the Courier Mail of 5/07/06 listed the cost of the much, much smaller Wyaralong Dam at an estimated $400 million. So greater Brisbane was able to buy a ten times larger storage capacity for the same price only five years earlier.

At July 15, 2006 10:56 am, Blogger VaMEad said...

You have some thought provoking points
here & onlineopinion. Have you proof regards this damning crime!

At July 15, 2006 1:11 pm, Blogger Ian Mott said...

Yes, VaMead, the 2001/2002 Annual Report of SEQ Water has some detail of the sale.
Go to http://www.seqwco.com.au

At July 15, 2006 1:42 pm, Blogger Ian Mott said...

Sorry, that url has been changed to www.seqwater.com.au

The 2001/2001 annual Report has detail of the price increases but falsely claims that the increased profit is from increased sales. Approximately 75% of the profit improvement came from the price increase.

Detail on the calculation of the transfer price to the new corporate entity appears to have been deleted since the complaint was lodged with ASIC.


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