Taskforce into Stateships leases with Westpac Bank to start in New Year

13/12/94

Transport Minister Eric Charlton said the Ministerial taskforce into the Stateships' vessel leases with the Westpac Bank would begin early in the New Year.

Mr Charlton said the investigation, which would use independent technical and financial expertise, would examine the circumstances surrounding the 1989 deal which had exposed Stateships to a $91.6 million debt liability.

The Ministerial taskforce would also look at ways of bringing down $3 million in other Stateships fixed costs related to its superannuation liability and interest payments.

"We have known for some time that the leasing arrangement entered into by the previous Labor government is not a typical charter deal," Mr Charlton said.

"It is important to establish the grounds for that arrangement occurring the way it did in order for the Government to tackle the issue of trying to reduce that exposure in some way."

Since the signing of the lease documents covering the three ships in 1989, Stateships has paid out $27.7 million in charter hire payments.  A further $35.9 million needs to be paid to complete the requirements of the contract.

However, the financial burden on Stateships continues after the termination of the contract.  At the expiration of the lease, Stateships is required to either buy the ships outright for $28 million or make up the difference if the market value is less.

"On current values, the ships will be worth about $4 million each at the end of the charter period, so Stateships is up for a total of $91.6 million to ultimately own the vessels," Mr Charlton said.

"If the ships had been sourced from overseas, the purchase price would have been $34.3 million with an identified financing cost of $48.5 million and a final purchase option of $4 million per vessel.

"That is a total of $60.5 million over 10 years instead of the $91.6 million required under the Westpac arrangement.

"Faced with such a mountain of debt, the Government can not further consider any arrangement with the private sector until it can lower the fixed cost burden on Stateships, to which the Westpac leases are central."

Mr Charlton also criticised some media organisations and the Opposition for distorting the facts of tendering process.

"Two errors of fact have emerged so far - that the Government was intending to sell Stateships and that the private tenderers would save the Government $4 million.

"Both are wrong. The Government was never contemplating a sale of Stateships - the tender invited private companies to become involved in the management and day-to-day operations of the organisation with the Government paying all Stateships' fixed costs.

"While the two private tenderers offered payments to the Government in the order of $4 million, this would have resulted in a net income of $2 million after taking into account the Government's agreement to provide $19 million to cover all fixed costs.

"The Government, through the introduction of its own initiatives prior to and during the tender process, has already saved $1.2 million.

"The remainder of the savings identified in the tendering process, which is $2 million, will be achieved by the Government and is not reliant on a private operator being involved."

Mr Charlton said the Government had to ensure that in addressing the issue of Stateships' costs, that the current quality of service to the North-West was maintained or increased.

"The reliance placed on Stateships' services by people and industry in the North West is a key factor and one that has been overlooked by the Opposition," he said.

Media contact: Dean Roberts (09) 321 7333