HOUSE OF ASSEMBLY, BUDGET ESTIMATE COMMITTEE HEARING,
DEPARTMENT OF ECONOMIC DEVELOPMENT, 29TH JUNE 11
Extract –Aprin, Tasmanian Development Board Related
[5.15 p.m.]
CHAIR - Minister, I want to turn to a fairly pressing and important matter and
that is around the approach that has been made to your department from Aprin
Logging's subsidiary company, I think technically, but it doesn't matter, Fibre Plus.
When was first contact made between them and your department? I do have a series
of questions.
Mr O'BYRNE - First contact was made with my office on Friday 3 June.
Mr O'Connor contacted my office and wanted to seek support. I wasn't able to meet
with him but two of my staff members met with him and a couple of his colleagues on
7 June. I just want to make the point that I receive approaches from companies Tasmanian, international, Chinese, European, all over the world virtually every day
seeking government support and seeking a government role in a whole range of
ventures. So essentially it comes to me, we meet with them CHAIR - That is one of my next questions.
Mr O'BYRNE - we do the g'days and then we refer them to the department
officials, for the department officials to meet with them, ascertain what their potential
needs are, and then either no action is taken, some action is taken or we move forward
from there.
CHAIR - Okay, so your officials met with them. What was the nature of the
request that they put? I understand that Mr O'BYRNE - I think you know, I think it has been reported.
CHAIR - they have asked your department for a loan of some money.
Mr O'BYRNE - Yes. And, again, it is not unusual for businesspeople,
organisations or industry delegations to come to the Tasmanian Government seeking
some form of assistance or support. The Tasmanian Development Board, which was
established under the Tasmanian Development Act of 1983, has a separate loan
portfolio, so they have a separate assessment and a separate role from the
Consolidated Fund. The TDR board has a role to play to assess, and their role is
essentially to encourage and promote the balanced economic development of
Tasmania by sustaining an effective partnership between business and government
which fully utilises the strategic advantage and human resources of the State. So that
was set up under the act in the early 1980s to try to remove the politics and the cherrypicking, I suppose, of certain developments and certain business proposals.
The TDR board, over many years, has played at arms-length an independent role
to assist companies, by way of grants, loans and underwriting. There is a whole range
of different activities that they have undertaken over 30 years and they have done it
pretty well. There is a whole range of companies that I can list that they have
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supported over the years - Cadbury-Schweppes, JB Swift, Huon Aquaculture,
Verwood, Marinova, which is to assist the establishment of a pharmaceutical-grade
extraction facility in Cambridge in southern Tasmania, Vodafone, Sitel, Incat. They
have a whole history in assisting Tasmanian businesses, either when they are going
through a financial difficulty or they need the Government to play a role for the sake
of an industry or for the sake of economic development or for jobs in Tasmania.
Because that happens quite regularly, the applicant then went to the department and
the department went through the details and what they were requiring and prepared
the matter for the board to consider.
Mr HODGMAN - So that is your reference, is it, to the TDA? It is to refer it to
them for assessing?
Mr O'BYRNE - Essentially, and I think that is the reason, quite strategically Mr HODGMAN - In this case, I mean, not generally.
Mr O'BYRNE - Absolutely in this case, and whenever there is a company that
seeks the support of a Tasmanian business we refer them through the department and,
if it is appropriate, through to the board, for the board to make an independent, armslength assessment of the proposal. It is very rigorous and a whole range of things are
taken into account.
CHAIR - Can we get the process clear? I am very interested in what happens.
So your office essentially is the front door?
Mr O'BYRNE - Sometimes, sometimes people go straight to the department.
CHAIR - So there are a few possible paths of entry, but a reference is then made
to the department which compiles a brief for the Tasmanian Development Authority.
What do they do with it before they refer it to the board?
Mr O'BYRNE - Essentially particular information is sought and examined by
departmental officers and that is: a business plan; historical and financial statements
including balance sheets, profit and loss statements and cash flow statements; cash
flow projections; company searches through ASIC; credit checks on applicants and
lay individuals. In that process the board also engages the Crown Solicitor's Office to
provide legal advice and documentation and to either have a look at the
documentation to ensure the Government's interests are looked after. At times they
have sought external consultants where appropriate to provide formal advice and
support. Also, in the broader context of the role of the board, they make an
assessment of the benefits and the key risks. They manage their own loan portfolio.
CHAIR - Can we just stop at each of the gateways? So within the department Mr O'BYRNE - For this case or just normally?
CHAIR - As a rule. You department compiles this information and passes it off
to the Tasmanian Development Authority.
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Mr O'BYRNE - To the board.
CHAIR - Right. What is the authority? Who is the authority?
Mr O'BYRNE - What do you mean?
CHAIR - The Tasmanian Development Authority has a board.
Mr O'BYRNE - There is an act which governs the actions and activities of the
board. It is the Tasmanian Development Act 1983. There are responsibilities under
that act and under that act is established the board. The board is to consider the
financial activities. They have been allocated an amount of money and that becomes
their loan portfolio. It is not a part of the Consolidated Fund. They have money
separate from day-to-day government money and their role is to support Tasmanian
business appropriately with rigorous assessments. They meet monthly and their loan
portfolio is managed based on what they have in there at the moment, what money is
coming back in, so you do the fiduciary responsibility of any organisation managing a
loan portfolio.
CHAIR - So the authority itself is really just a notional idea? It is the board that
is the important part. Is there anyone who receives a pay packet or has a job
description that says they work for the Tasmanian Development Authority?
Mr KELLEHER - As well as my role as secretary of the department, in relation
to the Economic Development portfolio I am the CEO of the Tasmanian Development
Resources Board. I don't receive a pay packet because I already get one. I am an
officer reporting to that board. Essentially the department supports the operation.
CHAIR - They then make a recommendation to you, Minister?
Mr O'BYRNE - To the Treasurer and me.
CHAIR - So that recommendation goes to both at the same time.
Mr O'BYRNE - It depends on the size of the loan.
CHAIR - Or is it to you first and then, subject to your approval, off to the
Treasurer?
Mr WATSON - It is specified in the act as to what the different levels as to
whether the board can approve it themselves or not.
Mr O'BYRNE - Obviously the lower levels the board makes the approvals and
as you move up the scale it comes to me. A recommendation is made to me and then
I make my decision and it goes to the Treasurer and Treasury. It then goes back to the
board because most of the loans usually have conditions precedent. In the case we are
talking here, the applicant, there are a number of conditions precedent on that
application. Essentially the structure of the request is made to the board, the board
makes a decision and a recommendation, depending on the size, it goes to the
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Economic Development minister and then the Treasurer; it then goes back to the
board to fulfil their obligations.
CHAIR - Right. What is the size of the loan portfolio in total perhaps?
Mr O'BYRNE - I do not have that in front of me
CHAIR - Can you identify what the total capacity is and what, as of this day, its
loadable capacity?
Mr O'BYRNE - That does ebb and flow depending on the activity.
CHAIR - That is right so I am asking two questions.
Mr KELLEHER - As long as you are happy to have not a total exact number
but a picture.
CHAIR - Yes.
Mr KELLEHER - The overall capacity of the loan portfolio can be up to
$100 million but the current broad level, bearing in mind the repayments, is around
about $30 million currently of the loan portfolio.
CHAIR - Right, so it has plenty of spare capacity.
Mr O'BYRNE - You have some people on the board who are very conservative
and they probably would not have that view. They would want to make sure that they
are rigorous in their process.
CHAIR - Absolutely.
Mr O'BYRNE - They treat it as their money, Tasmania's money; it is very
important and it is a very responsible role they have and they manage that portfolio
alone - I would say, conservatively, but also prudently to support Tasmanian business,
industry and jobs.
CHAIR - Thank you; that is very good.
Just coming back to the request from Aprin, can you inform the committee as to
how much that request was for?
Mr O'BYRNE - I am not able to do that because the process is still CHAIR - No, but I am able to ask the question.
Mr O'BYRNE - Yes, but I am not able to give you an answer at this stage
because the process is still working through. There are a number of conditions and a
number of things to be resolved so I am not able to, at this stage. If the process
concludes and a loan is granted, we have, from time to time, been able to make the
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details available but only to the extent that it does not compromise commercial
activity.
CHAIR - That is fine. I do not have a problem with that. Can you tell me where
this loan is up to in the process?
Mr O'BYRNE - Both the Treasurer and I have accepted the recommendation of
the board. It is now back with them because, as I said, there are a number of
conditions precedent on the approval of that loan which need to be resolved and are
yet to be resolved so it is back with the board.
CHAIR - Thank you very much. The Treasurer, I think it was, indicated that the
first stage for any company is to go out and seek a commercial loan and it is only if
there is peculiar circumstance or special circumstances that they might not be able to
do that. The key one is that it might not be able to be backed by security of land or a
mortgage or something like that. Is the security that is being offered for this loan the
letter of intent from Forestry Tasmania, that Minister Green referred to in the
Parliament a couple of weeks ago?
Mr O'BYRNE - As I said, the process is still going through; I am not able to
give you those details until the board has concluded its work. It may very well be that
the company cannot meet the condition precedents and therefore there is no loan
given. It would be inappropriate for me to give that information at a time when the
process is still live and, as you have said, it is absolutely a requirement; usually the
first question we ask of anyone who comes and asks for Government support is have
you gone to your own financers. With this case, as it has been with a number of
cases, there are multiple points of financial support to any development and the
Government is but one bit. Again, the board goes to absolute lengths to ensure that
the risk to the loan fund is mitigated.
CHAIR - Right. I have one last question and then over to Mr Hodgman. Are
you satisfied that Aprin has been able to demonstrate that they have a market for any
product that would be exported from Triabunna and can you inform me as to whether
that market is one that involves woodchips or wood pellets?
Mr O'BYRNE - The board has made a rigorous assessment on the application of
the loan. There are a number of conditions precedent to that. I am not going to
speculate on what they are but I support the deliberations of the board to ensure that
the risk and the potential risk to the loan and to that applicant not funding that loan or
being able to meet the obligations of that loan will be met. I am not going to
speculate on a market or potential market or not, we are still live in the proceedings of
the assessment of the applicant's loan, so will say that the board has exercised its duty
extensively and appropriately, and issues such as the viability of the company to meet
any loan that we give it has been considered.
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