Dead in the water

The Australian Services Union (ASU) recently released the report (PDF 516KB) Dead in the Water - the case against privatisation.

They call on all political parties to make it known where they stand on the issue of water privatisation before the next New South Wales State election.

As a matter of interest I wrote to Premier Kristina Keneally on February 18, 2010 to raise the following concerns:

Desalination

Sydney Desalination Plant Pty Ltd ("SDP") is a wholly owned subsidiary of Sydney Water Corporation, with $86,876,582 in issued and fully paid up shares as at February 2010. The Company’s parent entity, Sydney Water Corporation, is a NSW statutory owned corporation. SDP can’t borrow from the market in its own name, so the NSW Treasury Corporation raises borrowings on its behalf.

Have NSW Treasury Corporation’s borrowings on behalf of SDP been underwritten by any external financial institution(s)? If so, which institution(s)?

SDP’s June 30, 2009 audited financial statements say “... when construction of the desalination plant at Kurnell is completed, it is expected that any maturing loans at that time will initially be refinanced. Subsequently, loans will be repaid over time when the Company is able to earn revenue in its own right from operating and maintaining the plant ...”

As Veolia has been awarded the licence to operate and maintain the plant for the first 20 years, does that mean SDP’s loans will be unpaid and accruing interest for that first 20 years? What happens to SDP’s revenue if, after 20 years, the asset itself has deteriorated to the point of requiring substantial repairs? Is "maintenance" in the contract with Veolia defined to prevent that?

You would be aware of reports in 2007 that executives in some overseas subsidiaries of Veolia Environnement had been convicted in the past of bribing foreign government officials to win contracts. The former water utilities minister, Carl Scully, referred probity concerns about Veolia to an independent auditor, the Deloitte partner Rory O'Connor, who gave the Australian division of the giant water company a clean bill of health.

Is the independent auditor’s report publicly available? If so, where? If not, why not?

Veolia Finance issued a press release on July 18, 2007 saying that “... The contract is for the complete design, build, operation and maintenance of a reverse osmosis desalination plant with expected consolidated turnover of approximately 570 million Euros for Veolia Water over the life of the project ...”

How much of this money, and how much interest on loans, could NSW taxpayers have saved had Sydney Water Corporation kept responsibility for operating and maintaining the desalination plant for the first 20 years?

Is the government committed to developing water technology for this and other desalination plants, or will taxpayers be paying ongoing licence fees to Veolia for the technology we are paying them to develop?

Indeed, has the government already signed licences for the use of one or more patents in relation to the desalination plant? If so, with whom and at what cost?

The Auditor-General’s Report to Parliament 2009 Volume Seven states that “... Once operational, the desalination plant will have the capacity to provide over 15 per cent of Sydney’s current water consumption by producing 250 megalitres of water per day, with a possibility of scaling up to 500 megalitres (up to 30 per cent of Sydney’s drinking water) in the future, if needed.”