Is the business empire of Kerry Stokes hard-up and in need of the odd million dollars of help from Canberra? Yes, apparently; $6 million to be precise. Kerry’s a billionaire who always has his hand out for government help, whether cash (such as the dropping of TV licence fees for Seven and the rest of the TV industry), legislative changes (such as freeing up media control and ownership laws) and most recently a $6 million handout for his energy associate company, Beach Energy, with all the trappings of corporate welfare.
Beach is the newest and most interesting addition to the Stokes empire. There are three main companies — Seven Group Holdings, the master company with a market value of $5.8 billion (more than 70% owned by Stokes and his family) whose value is up 70% in the past year; Seven West Media, the weak spot, but on the mend with a value $867 million that is up nearly 30% in the last month; and Beach Energy, 25.7% owned by Seven Group, whose value is up a fat 170% in the past year to $3.6 billion. Stokes’ share of all this is around $4 billion. He clearly doesn’t need a handout from Canberra.
So with all that value, why then does Beach need a grant from the department of resources minister Matt Canavan, who has never met a fossil fuel or producer he didn’t like. In an almost unnoticed announcement in late March, Canavan’s department revealed grants totalling $24 million to four companies. The ABC mentioned a $6 million grant to the Chinese-owned energy group Westside, and noted the grant to Beach, but failed to ask why a company controlled by a billionaire needed public funding.
The release from Canavan’s department said Beach was getting $6 million towards the $22.6 million cost of “a new Katnook Gas Processing facility to process gas from the south east of South Australia in the Otway Basin”. Other companies include Westside, Armour Energy (which is associated with Queensland-based coal seam gas and coal mining companies) and a small US company, Tri-Star Fairview, with interests in the Queensland coal seam gas sector.
But money is not a worry for Beach. Its March quarter production report revealed that the company saw “free cash flow generation strong with approximately $133 million generated for the quarter. Surplus cash reduces net gearing to 29% as at 31 March 2018 with liquidity at $647 million.” The $22.6 million investment in the Katnook plant could have easily been financed out of free cash flow and the company would have avoided touching its cash pile.
Canavan’s department said the hand outs to the companies were made under the government’s Gas Acceleration Plan, which was set up to help develop and secure domestic gas supplies. How giving $6 million to Beach for a $22.6 million project will deliver gas faster from the Katnook plant to the market is problematic. Beach clearly has the money to finance it all by itself.
And you have to wonder about the due diligence conducted by Senator Canavan’s office. According to a research note in April, analysts at Macquarie upgraded Beach Energy’s to “neutral” on the back of stronger prices as the expectation of a 30% divestment of its Otway Basin assets. Would they include the Katnook plant, financed partially by Australian taxpayers and then monetised by Beach into a nice fat price for that 30% sale? And if there is a sale, will Beach hand back some or all of the $6 million? This government forces welfare recipients to repay monies that are over-paid, but not for the corporate sector’s welfare handouts. It seems the cash flow is all one way.
Corporate Welfare = Good; Welfare for the Needy = Bad…..at least in Librorts Party world.
It’s official: the Turnbull government only values Stokes one fifth as important as Murdoch ($30M of taxpayers’ money handed to Foxtel).
Perhaps he needs to donate more to get full status.
Remarkable, though, that this government, despite its right wing fanaticism, doesn’t seem to understand that capitalism was never designed to be a system where governments put up all the money and take all the risks and mates keep all the profits.
NB. Bernard’s article above, “… rank socialism — become almost Stalinist in its regulatory demands, including threatening to impose a domestic gas reservation and trying to dictate what companies did with their assets.“.
Simple, the wealthy always need more money. The government always obliges.
We have an enormous homelessness problem and we are giving rich, profitable businesses government handouts. Unbelievable!