Territory Stories

9.1 The Board’s Strategic Directions 2016-2020 May 2016



9.1 The Board’s Strategic Directions 2016-2020 May 2016

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Tabled paper 1883


Tabled Papers for 12th Assembly 2012 - 2016; Tabled Papers; ParliamentNT






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4.2 Strengths (and opportunities) 4.2.1 Monopoly and regulated services Since structural separation in 2014, Power and Water's remaining utility businesses operate in a monopoly environment, subject to varying degrees of regulation. This environment has the potential advantages of regulated sectors such as commercially attractive shareholder returns. While regulatory changes will continue, a regulated utility operated well should be able to deliver consistent returns with growing asset values. However, leveraging the natural strengths of a regulated multi-utility requires a sustained focus on good governance and management, and so strong operational practice and performance. Power and Water's track record in this regard is discussed in section 4.4 below, recognising strategic weaknesses. Power and Water needs to better understand its business and financial performance. This starts with sound foundations of integrated financial, asset and revenue systems and with accurate performance reporting. With a robust foundation, the Board and management can effectively monitor, benchmark and improve Corporation performance. 4.2.2 Government ownership Power and Water's government ownership provides significant advantages. The Corporation has access to capital (whether debt or equity) at a lower cost than privately-owned utilities. While no government guarantee is involved, the Corporation's bankers and suppliers recognise the strong parent support of its owner-government. Government ownership naturally supports a customer centric and community-minded approach, and the adoption of more socially responsible objectives than privately-owned utilities. The Board regards these features as inherent strengths for Power and Water. Also, the owner-government does not require the same financial returns as those required by privately-owned utilities. However, any additional Corporation capital, not funded from operating cash flows, must be borrowed through Treasury. This impacts Northern Territory public debt levels. By contrast, privately-owned utilities are finding it increasingly easier than government-owned corporations to access the capital necessary to grow a utility business's asset base. Governments generally are sensitive to debt levels and may prefer to limit debt levels or prioritise the use of debt levels across other government services such as health and education. THE BOARD'S STRATEGIC DIRECTIONS 20-16-2020 13

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