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Legislative Assembly for the ACT: 1997 Week 4 Hansard (7 May) . . Page.. 1060 ..

MRS CARNELL (continuing):

of comments they have been making. It sets out on page 22 a debt-equity ratio comparison of ACTEW versus Energy Australia, Integral, SEQEC and lots of other energy providers in Australia, which shows that ACTEW's debt-equity ratio is by far the smallest. It then states:

As shown in the comparison, ACTEW has the lowest gearing compared with enterprises in both the private and public sectors. ACTEW's level of debt is substantially below the level that would be expected in a commercial business.

It goes on:

... too low a debt level may also create inter-generational inequity by shifting the burden of providing assets to service future generations on to the current generation, and possibly lead to suboptimal investment and management decisions.

It then goes on to say:

The level of debt and the level of cash retained within the business relative to what is paid to the shareholder is a matter for Government. However, the level of cash generation -

rather than holdings -

reflects upon the profitability of the organisation and is a concern of the Commission.

The cash generation is not affected by the amount of debt or the amount of cash necessarily that the entity holds, as put by the pricing commissioner. He goes on to say:

The determination allows ACTEW to cover its operating costs, fund its capital works, meet its debt servicing obligations and satisfy the Government's dividend expectations while still increasing its net cash holdings.

Mr Whitecross: But since then you have increased its debt servicing costs and changed the dividend policy.

MRS CARNELL: It says "while still increasing its net cash holdings".

Mr Whitecross: That is right, and since then you have increased debt servicing costs.

MR SPEAKER: Order! Would you be quiet, Mr Whitecross.

MRS CARNELL: Mr Speaker, the pricing commissioner himself suggested that we go down a capital restructuring approach. As he said, the approach we have at the moment can produce suboptimal management decisions, as those opposite will realise. I am sure Mr Osborne would realise, too, that it is significantly better for an entity such as ACTEW

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