Legislative Council, Tuesday 5 September 2023

Ms FORREST question to LEADER of the GOVERNMENT in the LEGISLATIVE COUNCIL, Mrs HISCUTT

(1) With regard to the publicly available Early Works proposal lodged by Marinus Link P/L with the Australian Energy Regulator (AER):

(a) How will the net expenditure of $128.9 million be funded; and

The $128.9m will be funded via an intercompany loan from TasNetworks to MLPL, TasNetworks will fund the loan through borrowing from TasCorp. Interest is charged on the intercompany loan.

(b) how will the net expenditure be treated in TasNetworks’ financial statements, that is, will it be capitalised or expensed; and

The expenditure on the MLPL portion of the project has and will be categorised as capital or operating expenditure by applying the guidance/requirements provided in Australian Accounting Standards AASB 116 Property, Plant and Equipment, AASB 138 Intangible Assets and any additional guidance or requirements included in Treasurers Instructions. The application of the accounting treatment contained in the Standards, to the expenditure of FY23 and prior years, has been audited by the TAO.

(c) if expensed, will it be included in the calculation of profits which determine:
     i) the income tax equivalent payments to government; and/or

That part of the expenditure that is operating expenditure will have an impact on the Profit and Loss of MLPL. The impact on the income tax equivalent tax expense/(benefit) is determined by applying the requirements of the National Tax Equivalent Regime. MLPL has generated an income tax benefit over the past two years. When grouped with TasNetworks this potentially reduces the amount of tax payable but increases/decreases the profit or loss.

ii) the dividend payments to government; and

To the extent that net profit is impacted, there will be associated flow-on impacts to the calculation of any dividend payment. The Government’s general dividend policy is that government businesses pay 90 per cent of net profits after tax as a dividend each year.

(d) if capitalised:
   i) will it be added to the intangible asset of $31.7 million currently on TasNetworks’ balance sheet with the label Marinus Link; or

That part of the expenditure that is capital in nature has been categorised as either an Intangible Work in Progress or Capital Work in Progress through application of the Accounting Standards mentioned in part (b).

ii) if not, how will it be treated; and

See part (i.)

(e) if any capitalised amount is subsequently impaired will the impairment costs be included in the calculation of profits which determine:

MLPL has applied the guidance/requirements of AASB 136 Impairment of Assets. If an asset is impaired for any reason in the future, the impairment expense is reflected in the Profit and Loss.

i) the income tax equivalent payments to government; and/or

ii) the dividend payments to government?

It would impact the profit or loss and therefore the dividend payment but again the impact on tax would need to be considered.

(2) With regard to the same Early Works proposal lodged by Marinus Link P/L with the Australian Energy Regulator (AER), specifically the references to the North West Transmission Development (NWTD), Table 2 of the proposal indicates $19.5 million of grant funding received/to be received in respect of the NWTD:

(a) What is the total spending on NWTD over the same period; and

The table below provides the total and net expenditure (both actuals to date and forecast) for the NWTD project (subject to grant funding) for the period July 2021 through December 2024. The split of Opex and Capex can also be seen, as well as the Net Expenditure after Grant funding. The Staverton to Hampshire Hills link was not subject to grant funding and as such has been excluded from the below table.

(b) will the amounts be expensed or capitalised; and
    i) if capitalised, will it form part of TasNetworks’ Regulated Asset Base (RAB) for transmission assets; and

If the project proceeds, TasNetworks will seek to recover the costs via the Contingent Project Application (CPA). Capex costs will be capitalised and form part of TasNetworks transmission RAB and TasNetworks will seek an opex allowance, consistent with the table above.

ii) if not how will it be treated; and

Any project costs that are not able to be included in the CPA will be expensed in the books of TasNetworks the year they are incurred.

(c) when is it expected TasNetworks will start receiving a return from the NWTD outlays; and

At this point in time, TasNetworks expects to lodge a CPA with the Australian Energy Regulator (AER) in early 2024, this should result in revenue being derived by TasNetworks in relation to the NWTD from 2025-26.

(d) in the event NWTD forms part of TasNetworks RAB, what is the process for inclusion in TasNetworks RAB so that the allowable return to TasNetworks can be determined?

The process to include the NWTD in TasNetworks RAB is via a CPA based on the NWTD being part of the Project Marinus actionable project under the Integrated System Plan. A CPA requires the AER to amend a revenue determination to include the revenue required for a contingent project.