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Annual Report 2005-06

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Government-owned corporations performance and governance output

The Office of Government Owned Corporations (OGOC), established in 2000, supports and advises shareholding Queensland Government Ministers on the State's ownership and administration of 18 Government-owned corporations (GOCs). This includes ensuring a strategic approach to policy development for GOCs, monitoring performance and ensuring GOCs comply with relevant legislation. With the 18 GOCs in Queensland operating in energy, transport, water and other essential infrastructure, OGOC deals with a range of complex issues.

Vision

High-performing Queensland Government-owned corporations.

Mission

To manage the State's interest in its Government-owned corporations in aiming to maximise the State Government's investment return, build shareholder value and ensure appropriate corporate governance.

Highlights

• Assessed 33 GOC investment proposals to a total value of $3.8 billion.
• Collected $961 million of dividends and tax equivalents from GOCs.
• Administered approximately $940 million in equity injections on behalf of shareholding Ministers to support large capital expenditure programs.
• Finalised and implemented corporate governance guidelines for GOCs and worked with GOCs to apply these guidelines.

Structure

• Under Treasurer, Gerard Bradley
  • Deputy Under Treasurer, Tim Spencer
    • Executive Director, Peter Dann
    • Deputy Executive Director, Pauline Elliott
      • Director, Energy, Elizabeth West
      • Director, Transport, Resources and Corporate, Lynne Bulloch
      • Director, Policy and Governance, Virginia McCabe

Output performance highlights

Output performance highlights

Measure	Target	Actual
Quantity
Number of GOC Statements of Corporate Intent completed	18	18
Number of performance monitoring reports completed	72	72
Quality
Percentage of Ministerial correspondence prepared to agreed Treasury standards	95%	95%
Timeliness
Percentage of Statements of Corporate Intent received and reviewed within the scheduled timeframe	100%	100%
Cost
Cost of monitoring and governing per GOC	$0.17M	$0.16M

Highlights

Highlights for the Government-owned corporations performance and governance output

Strategic business priority	Highlights	The year ahead
Assist shareholding Ministers in setting performance targets for GOCs.	Supported shareholding Ministers in finalising Statements of Corporate Intent. Collected $961 million in dividends and tax equivalents from GOCs.	Collect $957 million in forecast revenue to fund Government services.
Provide clear guidance on the State's risk tolerance and assess risks and returns faced by GOCs in pursuing business and investment strategies.	Assessed 33 GOC investment proposals to a total value of $3.8 billion. Administered approximately $940 million in equity injections on behalf of shareholding Ministers to support large capital expenditure programs. Supported the Government's comprehensive review of the Queensland energy GOC sector aimed at ensuring its future structure is best suited to meet the demands of the changing market.	Assess GOC capital programs to a total budgeted value of $4.7 billion. Work with the Government's Retail Assets Sale Implementation Team and relevant GOCs to finalise implementation of the outcomes of the energy review including the sale of gas network and retail energy businesses.
Ensure GOCs comply with all relevant policies.	Finalised and implemented corporate governance guidelines for GOCs and worked with GOCs to apply these guidelines.	Progress work on proposed legislative amendments to enhance the GOC governance framework.

Key issues facing the output

• Increasing levels of competition in the markets within which the GOCs operate, where GOCs have operated traditionally as monopoly service providers.
• Skills shortages, particularly in regional areas, which may impact on GOCs' ability to deliver capital expenditure programs for major infrastructure investment.
• The introduction of full retail contestability for electricity and gas in Queensland and its impact on energy GOCs.

The 18 Government-owned corporations

Energy

• CS Energy Limited
• ENERGEX Limited
• Ergon Energy Corporation Limited
• Queensland Electricity Transmission Corporation Limited (Powerlink Queensland)
• Queensland Power Trading Corporation (Enertrade)
• Stanwell Corporation Limited
• Tarong Energy Corporation Limited

Funds management

• Queensland Investment Corporation

Gaming

• Golden Casket Lottery Corporation Limited

Ports

• Bundaberg Port Authority
• Cairns Port Authority
• Central Queensland Ports Authority
• Mackay Port Authority
• Port of Brisbane Corporation
• Ports Corporation of Queensland
• Townsville Port Authority

Rail

• Queensland Rail

Water

• SunWater

Strategic business priorities

• Finalised Statements of Corporate Intent on schedule

  In 2005-06, we worked with GOCs to finalise their Statements of Corporate Intent for 2006-07 in a timely manner. All GOC Statements of Corporate Intent were agreed to by the GOC boards and shareholding Ministers by 30 June 2006.

  We also completed a review of the format and content of the GOC Statements of Corporate Intent in advance of negotiations for 2006-07, with the aim of improving the consistency and simplicity of these statements. In the year ahead, we will monitor and improve the effectiveness of GOC Statements of Corporate Intent.

• Returned benefits to the community

  Treasury collected GOC sector dividends and tax equivalent payments of $961 million for the Queensland Government in 2005-06, with the major contributions coming from the energy and rail GOCs. These dividends and tax equivalents were directed to fund essential government services for the Queensland community.

  In 2006-07, returns from GOCs are expected to be $957 million. The returns will continue to provide a significant funding source to deliver services for Queenslanders and to meet the Queensland Government's priorities.

• Assessed risk for investments

  Throughout 2005-06, we assessed 33 GOC investment proposals to a total value of $3.8 billion to identify any potential risks to the State and to confirm risk management strategies.

  We assessed major investment proposals including:

  • Queensland Rail's purchase of ARG (Australian Railroad Group) in conjunction with Babcock and Brown
  • Stanwell Corporation's low-pressure turbine upgrade
  • SunWater Burdekin to Moranbah water pipeline
  • Ergon Energy acquisition of Powerdirect
  • ongoing investment in the electricity distribution network to ensure security of electricity supply.

  In the year ahead, we will continue to assess GOC investment proposals with other shareholding departments.

• Finalised and implemented Cost of Capital Principles for GOCs

  We finalised and implemented Cost of Capital Principles for GOCs. The Principles provide a framework for GOCs to calculate their cost of capital, which calculates the expected rate of return on the GOCs' assets, and are used to assess the viability of GOC investment proposals. This will provide consistency for evaluating investment proposals across the GOC sector. In 2006-07, we will continue to assist GOCs to apply the Principles in the calculation of their cost of capital.

• Supported GOCs' capital expenditure

  In 2005-06, we administered equity injections totalling approximately $940 million on behalf of shareholding Ministers to support large capital expenditure programs, which a number of GOCs are now carrying out.

  We will continue to support shareholding Ministers by evaluating capital expenditure programs and administering the GOCs' equity injection requirements in 2006-07. The total budgeted capital expenditure of the GOC sector for 2006-07 is approximately $4.7 billion, including electricity distribution network upgrades worth $1.3 billion.

• Finalised corporate governance guidelines for GOCs

  We finalised and implemented corporate governance guidelines for GOCs, which include recommendations to assist GOCs in developing their governance arrangements to meet community expectations of accountability.

  In the year ahead, we will assist GOCs to apply the guidelines and we will monitor compliance with these guidelines. We will also organise a forum for GOC directors and chief executives, with the aim of building a shared understanding of shareholding Ministers' expectations about GOC governance generally.

• Implemented framework for monitoring and reviewing GOC sponsorships and advertising

  We implemented a framework for monitoring and reviewing GOC sponsorship, advertising, corporate entertainment and donation arrangements. In 2006-07, we will continue to monitor and review GOC sponsorship and related arrangements in accordance with the framework.

Last reviewed 24 August 2009

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