Sting in the tail of SA Water debt-equity swap
Taxpayers footed a $27 million bill for extra borrowing costs because the State Government’s transfer of $2.7 billion in debt to SA Water did not occur in a timely manner last year.
The Budget papers reveal the extra borrowing costs in a section dealing with “general government expenses” that were $201 million higher that estimated in the 2014-15 Budget.
The additional costs included: “A $27 million increase in borrowing costs primarily related to the timing of the transfer of $2.7 billion of debt from the general government sector to SA Water, that occurred in October 2014, rather than July as budgeted”.
In response to a query from InDaily, a Treasury official said administrative procedures in finalising the debt transfer caused the delay.
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In the Budget last year the Government maintained that the debt transfer – which improved the Government’s balance sheet – would have “no impact on the pricing to water consumers”.
Instead, taxpayers continued to carry the borrowing costs of the Government debt with the unanticipated three-month delay costing $27 million.
The peak business lobby, Business SA, criticised the debt for equity swap last year and, in a pre-Budget submission this year, called on the Government to reverse the transaction because the additional debt had devalued the organisation and compromised its sale prospects.
Treasurer Tom Koutsantonis rejected Business SA’s overture, saying that, unlike the Liberal Party, the Labor Government would not be selling SA Water, so the lobby group’s concerns were “irrelevant”.
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