Financial Performance of Government Trading Enterprises, 1997-98 to 2001-02, Commission Research Paper, Ausinfo, Canberra
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)LQDQFLDO 3HUIRUPDQFH RI *RYHUQPHQW 7UDGLQJ (QWHUSULVHV &RPPLVVLRQ - WR - 5HVHDUFK 3DSHU Commonwealth of Australia 2003 ISBN 1 74037 119 4 This work is subject to copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra, ACT, 2601. Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Post Office Melbourne Vic 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] An appropriate citation for this paper is: Productivity Commission 2003, Financial Performance of Government Trading Enterprises, 1997-98 to 2001-02, Commission Research Paper, AusInfo, Canberra. The Productivity Commission The Productivity Commission, an independent Commonwealth agency, is the Government’s principal review and advisory body on microeconomic policy and regulation. It conducts public inquiries and research into a broad range of economic and social issues affecting the welfare of Australians. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Information on the Productivity Commission, its publications and its current work program can be found on the World Wide Web at www.pc.gov.au or by contacting Media and Publications on (03) 9653 2244. Foreword This report is the first in a new three-year program of research by the Productivity Commission designed to provide comparable information on the financial performance of government trading enterprises (GTEs). It continues previous work by the Commission and an earlier series of broader ‘Red Book’ reports, under the auspices of the Steering Committee on National Performance Monitoring of Government Trading Enterprises, between 1991 and 1997. The Commission has given a priority to its ongoing research into the performance of economic infrastructure industries and the impact of microeconomic reforms. It complements other Commission work, including benchmarking studies and reviews of price and service quality. Our research reveals that in 2001-02, over half of the monitored GTEs earned a return on assets that is below the risk-free return from long-term Commonwealth bonds. An even greater number failed to earn a commercial rate of return. Further, profitability in some sectors continued to deteriorate in 2001-02. In the current three-year program, the Commission has commenced an examination of the external governance arrangements for GTEs. When the work is completed, it will provide a basis for reviewing whether governance arrangements can be improved and to explore the appropriateness of alternative arrangements. This first report provides contextual information on aspects of governance that affect GTE performance. Research for the study was undertaken in the Economic Infrastructure Branch under the guidance of Commissioner Michael Woods. State and Territory governments cooperated by furnishing data collected for the Australian Bureau of Statistics Government Finance Statistics collection, and by assisting the Commission with its chapters. The Commission is very grateful for this continuing support. Gary Banks Chairman June 2003 FOREWORD III Contents Foreword iii Table of contents v Abbreviations ix Key points xiv 1 Introduction 1 1.1 Background 1 1.2 Scope 2 1.3 External governance 6 1.4 Report structure 7 2 Financial performance overview 9 2.1 Profitability 9 2.2 Financial management 13 2.3 Government transactions 16 3 Interpretation of performance measures 19 3.1 Data 19 3.2 Performance indicators 23 3A Definitions of financial performance indicators 29 Part A External governance research 4 Corporatisation framework 35 4.1 GTE reforms 35 4.2 Corporatisation 37 4.3 Corporatisation frameworks 44 CONTENTS V 5 Responsibility for objectives and board authority 63 5.1 Responsibility for meeting objectives 63 5.2 Board authority 64 5.3 Ministerial interventions 65 5.4 Other limits on board authority 68 6 GTE objectives 75 6.1 Establishing and approving objectives 75 6.2 Expression of objectives in statements of corporate intent 80 Part B GTE sector performance reports 7 Electricity 87 7.1 Monitored GTEs 87 7.2 Market environment 91 7.3 Profitability 97 7.4 Financial management 102 7.5 Financial transactions 105 7.6 GTE performance reports 109 8 Water, sewerage, drainage and irrigation 153 8.1 Monitored GTEs 153 8.2 Market environment 157 8.3 Profitability 161 8.4 Financial management 164 8.5 Transactions with government 166 8.6 GTE performance reports 169 9 Urban transport 217 9.1 Monitored GTEs 217 9.2 Market environment 219 9.3 Profitability 222 9.4 Financial management 224 9.5 Transactions with government 226 9.6 GTE performance reports 229 VI FINANCIAL PERFORMANCE MONITORING 10 Railways 239 10.1 Monitored GTEs 239 10.2 Market environment 242 10.3 Profitability 245 10.4 Financial management 246 10.5 Transactions with government 249 10.6 GTE performance reports 251 11 Ports 263 11.1 Monitored GTEs 263 11.2 Market environment 267 11.3 Profitability 271 11.4 Financial management 273 11.5 Transactions with government 275 11.6 GTE performance reports 277 12 Forestry 323 12.1 Monitored GTEs 324 12.2 Market environment 326 12.3 Profitability 329 12.4 Financial management 331 12.5 Transactions with government 333 12.6 GTE performance reports 335 13 Commonwealth GTEs 349 A Monitored GTEs, 2001-02 357 B Corporatisation framework in Australian jurisdictions 361 C Statements of corporate intent 421 References 449 CONTENTS VII Abbreviations AASB Australian Accounting Standards Board ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission ACTEW ACTEW Corporation Ltd AIE Australian Inland Energy AIEWI Australian Inland Energy and Water Infrastructure APA Albany Port Authority ARG Australian Railroad Group ARTC Australian Railtrack Corporation ASA Airservices Australia AUSTA Electric Queensland Generation Corporation BACL Brisbane Airport Corporation Limited BPA Benchmark Pricing Agreement BPC Burnie Port Corporation COAG Council of Australian Governments CPA Competition Principles Agreement CPI Consumer Price Index CSO Community Service Obligation CWW City West Water DBCT Dalrymple Bay Coal Terminal ABBREVIATIONS IX DDO Digital Data Obligation DPA Dampier Port Authority DPC Darwin Port Corporation DUS Department of Urban Services (ACT) EBIT Earning Before Interest and Tax ESC Act Energy Services Corporations Act 1995 ETEF Electricity Tariff Equalisation Fund FPA Fremantle Port Authority FPCWA Forest Products Commission of Western Australia GBE Government Business Enterprise GFS Government Financial Statistics GHz Giga (109) Hertz GOC Government Owned Corporation GPA Gladstone Port Authority GPFR General Purpose Financial Reports GTE Government Trading Enterprise GWh Giga (109) watt hours HEC Hydro-Electric Corporation HIA Hobart International Airport Pty Ltd HPC Hobart Port Corporation HWC Hunter Water Corporation IPART Independent Pricing and Regulatory Tribunal ISDN Integrated Service Data Network X FINANCIAL PERFORMANCE MONITORING kbps kilo bits per second Kilolitres 1000 litres kV Kilo Volt kWh Kilo (103) watt hours LGRE Local Government Rate Equivalent MDBC Murray–Darling Basin Commission ML Mega (106) litres MPA Mackay Port Authority MPC Melbourne Port Corporation MTT Metropolitan Transport Trust MW Mega (106) watts MWC Melbourne Water Corporation MWh Mega (106) watt hours NCC National Competition Council NCP National Competition Policy NEM National Electricity Market NEMMCO National Electricity Market Management Company NFPS National Forestry Policy Statement NPC Newcastle Port Corporation NTER National Tax Equivalent Regime NWWA North West Water Authority ORG Office of the Regulator-General OTTER Office of the Tasmanian Energy Regulator ABBREVIATIONS XI PAWA Power and Water Authority PBC Port of Brisbane Corporation PCQ Ports Corporation of Queensland PDC Port of Devonport Corporation PHPA Port Hedland Port Authority PKPC Port Kembla Port Corporation PPP Public–Private Partnership PTB Passenger Transport Board PTE Public Trading Enterprise QNI Queensland–New South Wales Interconnector QPTC Queensland Power and Trading Corporation QR Queensland Rail QTSC Queensland Transmission and Supply Corporation RAC Rail Access Corporation RBA Reserve Bank of Australia RFA Regional Forest Agreement RIC Rail Infrastructure Corporation SA Water South Australian Water Corporation SCA Sydney Catchment Authority SCI Statement of Corporate Intent SEW South East Water SFNSW State Forests New South Wales SHTPL Snowy Hydro Trading Pty Ltd XII FINANCIAL PERFORMANCE MONITORING SMHEA Snowy Mountains Hydro-Electric Authority SOC State Owned Corporation SOC Act State Owned Corporations Act 1989 SOE State Owned Enterprise SPC Sydney Ports Corporation SRA State Rail Authority STA State Transit Authority SWC Sydney Water Corporation SWIS South-West Interconnected System SWP State Water Projects TCV Treasury Corporation of Victoria TGT Terra Gas Trader TOC Territory Owned Corporation TPA Townsville Port Authority USO Universal Service Obligation VCA Victorian Channels Authority WAGRC Western Australia Government Railways Commission