 Infrastructure and SP AusNet have been engineered to pay management fees to external managers, although Spark paid its Hong Kong parent, CKI, $51.5 million earlier this year to buy back its own management and clean up what had been a quintuple-stapled security structure.
In the case of. As the network providers earn a ”regulated return” on their asset bases, there has been an incentive for them to overspend, or ”gold-plate” their networks.
Lurking in the catacombs of SP AusNet’s public documents are two telling disclosures. One, Singapore Power is entitled to 1 per cent of SP AusNet’s EBITDA (earnings before interest, tax, depreciation and amortisation). In this, it ranks ahead of SP’s other unit holders.
Two, the parent company is entitled to 1 per cent of the increase in the regulated asset base..
SP has paid Singapore Power at least $12 million every year since 2007. In 2012, the fee based on the increase in SP’s ”regulated asset base” was $6.7 million, struck on capital expenditure of $710 million.
The swelling asset base came even as the company drew legal fire over the maintenance of one of its remote power lines, allegedly a failure that may have contributed to the Black Saturday bushfires.
Although it often follows that what is bad for customers – higher prices – is good for security holders, as far as the externally managed power companies go, this is hardly the case.
It is difficult to see how unit holders in SP AusNet gain from delivering Singapore Power a claim over their EBITDA when the parent already holds the majority stake and benefits through distributions anyway.
Their interests are not aligned, and they stand at odds with the interests of customers too, in the light of the incentive for gold-plating.
Then there are the other side deals. There is a $1 million fee each year just for SP to use Singapore Power’s logo. There was $49 million in IT services fees and other payments relating to property, plant and equipment, and simply ”other”, which).
It is not only customers who are getting stung. The growth in fees to the parent outstripped the value delivered to unit holders. Net profit was virtually static at $255 million, operating cash flow down 9 per cent at $430.5 million, return on assets was 3 per cent and return on equity 8.8 per cent.
The one bright spot was the unit price, which rallied 22 per cent to $1.08 during the year, albeit from a low level associated with legal exposure to the Black Saturday bushfires.
While SP unit holders may be irked at having to stump up the costs that their external manager has incurred in providing, ironically, their very own SP management, Spark has improved its investors’ lot thanks to this year’s restructure. But it remains a stew of related-party transactions whose greatest beneficiaries are the foreign parents.
Both Spark and SP have been pursued by the Tax Office for aggressive tax structures.1 Interpretation
1.1 In these Conditions:
‘YOU ’ means the person who orders Goods from the Site
‘GOODS’ means the goods (including any instalment of the goods or any parts for them) which Knott is to supply in accordance with these Conditions
‘KNOTT’ means Knott-Avonride Limited (registered in England and Wales under company number 1691074)
‘CONDITIONS’ means these standard terms and conditions of sale
‘CONTRACT’ means the contract for the purchase and sale of the Goods
‘SITE’ means the Knott Webshop at.
‘WRITING’ includes first class mail or air mail, facsimile transmission or email to the email address set out on the Site facsimile transmission or email (confirmed by first class mail or air Knott shall sell and you shall purchase the Goods in accordance with your written order which is accepted by Knott through the Site, subject to these Conditions, which shall form the basis of the Contract and will exclude any other terms and conditions.
2.2 No variation to these Conditions shall be binding unless agreed in Writing between you and Knott.
2.3 Knott’s employees or agents are not authorised to make any representations concerning the Goods unless confirmed by Knott in Writing. In entering into the Contract you acknowledge that you do not rely on any such representations which are not so confirmed.
2.4 Any advice or recommendation given by Knott or its employees or agents to you as to the storage, application or use of the Goods which is not confirmed in Writing by Knott is followed or acted upon entirely your own risk, and accordingly Knott shall not be liable for any such advice or recommendation which is not so confirmed.
2.5 You are advised to refer to Knott’s general servicing and replacement literature when completing any service, maintenance or operation of any Knott product or alternatively contact Knott for further clarification. This information is also available on or is enclosed with the Goods.
2.6 For the avoidance of doubt it is your responsibility to ensure any Goods used as built in components are tested by you to your satisfaction for:
(i) the intended purpose
(ii) in the appropriate manner and
(iii) for a reasonable period of time
2.7 Any typographical or clerical error on the Site shall be subject to correction without any liability on the part of Knott.
3 Orders and specifications
3.1 Any offer made by you on the Site will be an invitation to make a binding offer and will not be binding on Knott. Knott will inform you if a particular item is no longer available. In this case a contract does not come into effect.
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3.3 Knott reserves the right to make any changes in the specification of the Goods which are required to conform with any applicable statutory or EC requirements or, where the Goods are to be supplied to Knott’s specification, which do not materially affect their quality or performance.
4 Price of the goods
4.1 The price of the Goods shall be as set out on the Site. All prices may be altered by Knott on the Site.
4.2 You will be required to pay extra for delivery. All prices are given by Knott on an ex works basis excluding delivery, packaging and insurance, and where Knott agrees to deliver the Goods otherwise than at Knott’s premises, you shall be liable to pay Knott’s charges for transport, delivery, packaging and insurance as provided to you when placing an order.
4.3 The price is exclusive of any applicable Value Added Tax, which you shall be additionally liable to pay to Knott depending on your location [and if you are a business customer your VAT registration].
5 Your right to cancel
5.1 You can cancel the Contract by telling us any time up to the end of the 30th day from the day you receive the Goods. You do not need to give us any reason for cancelling the Contract nor will you be obliged to pay any penalty.
5.2 If you wish to cancel the contract you MUST DO SO IN WRITING by sending an email to webspares@knottuk.com or by post to Knott Trailer Spares Shop at Europa House, Second Avenue, Centrum 100, Burton on Trent, Staffs, DE14 2WF. Alternatively by fax for the attention of Knott Trailer Spares Shop at the fax number 01283 534840. You can use the notice here.
You may use the FORM of words shown below if you wish.
To: Knott Trailer Spares Shop,
Address: Knott-Avonride Limited, Europa House, Second Avenue, Centrum 100, Burton-Upon-Trent,
Staffordshire. DE14 2WF
I/We hereby give notice that I/we wish to cancel my/our contract ……………………
(insert details of the contract /customer)
Signed
Name and Address
Date
5.3 The notice of cancellation is deemed to be served as soon as it is sent to us by email or posted or sent to us by fax provided you have proof of postage or a read receipt or a fax receipt.
5.4 If you cancel the Contract but we have already processed the Goods and they have been delivered you must not unpack the goods when they are received and must send the goods back to us for the attention of Knott Trailer Spares Shop at Europa House, Second Avenue, Centrum 100, Burton on Trent, Staffs, DE14 2WF at your own cost and risk as soon as possible.
5.5.1 When you tell us that you are cancelling the Contract, and the Goods have not been dispatched to you any sum debited to your account from your credit / debit card will be credited to your account by us as soon as possible and in any event within 14 days from the day after cancellation
5.5.2 When you tell us that you are cancelling the Contract where the Goods have already been dispatched to you then any sum debited to your account from your credit/debit