Fels takes his toll on Premier; Excelsior figures don’t add up

The southbound toll gates for traffic coming off the Sydney Harbour Bridge. Picture Craig Greenhill

Oh man, NSW Premier Chris Minns has been served a massive merde sandwich from his engagement of Professor Allan Fels, who’s been running an independent review of toll roads for the state.

Fels was always a go-to for Coalition leaders whenever they found themselves between a jam and a pickle. Some may recall he was hired under premier Mike Baird in 2015 to be the state’s Electricity Price Commissioner, then in 2017 as some sort of Emergency Services Levy Monitor commissar. No one really knew what he did and the office was shut down a couple of years later during the Berejiklian reign.

Thing about Fels is that he loves ideas that Minns absolutely hates. Privatisation, for example. Here he is some years back during debate over the sale of the state’s electricity assets, or the poles and wires as they were known.

Said Fels: “The evidence is that the privately owned networks operate at lower cost, and provide slightly better service than the publicly owned networks.”

And how’s that working out? Last month Minns’ Energy Minister Penny Sharpe said prices were too high for families and pretty much called privatisation the devil itself. “The large profits that are being made are the result of privatisation … it’s made it harder on households.”

Report author Professor Allan Fels. Picture: Aaron Francis

Fels has been back in a big way this week with the release of that aforementioned toll review, conducted for Minns with former Victorian consumer affairs chief Dr David Cousins, and for which they’re each being paid a handsome $1m to get out of bed each morning.

And by golly its recommendations are a veritable briar patch of election-losers. It’s all bitter fruit and landmines from page to page.

Fels wants two-way tolling on the Sydney Harbour Bridge, which Minns and Roads Minister John Graham both vociferously campaigned against in opposition, so they either have to back it in and look like unelectable hypocrites or ignore it and accept this was a waste of time. Margin Call suggests putting serious coin on the latter.

Even worse was Fels’ assumption that the M5 southwest cashback scheme would be scrapped. Seriously? It was an election promise, and the mere mention of that rogue assumption saw Minns floor it to Badgerys Creek and pretty much swear on a stack of mullets that he wouldn’t touch the rebate.

NSW Treasury, by the way, despises everything in this report, which you would expect considering Fels is being paid to kick turds at every transaction they’ve run in recent years.

But ultimately this all puts the Premier in a very uncomfortable position.

Fels’ argument is that in order to decrease the toll burden they need to be jacked up and shifted onto cohorts of notionally well-off individuals.

Minns is basically being urged by this guy to toll his way out of this mess. And that is the $2m magic pudding.

Excelsior questions

A few questions have arisen from Excelsior Capital’s latest Net Tangible Assets announcement, released on Thursday.

We’ve written about this company a few times now and noted peculiarities in its treatment of shareholders.

To recap: it’s a cashbox sitting on roughly $120m.

When it filed its results on the last big day of reporting season last month investors were hoping for a big fat dividend; instead they were tossed 3.5c per share which, as we reported, was just enough to buy a postage stamp and an envelope to send a letter of complaint.

Not that its board is looking for a crust, and this may be the point.

The company boss and major shareholder is Leanne Catelan, daughter of RP Data founder Ray Catelan.

She sold Potts Point mansion Bomera to steel tycoon Sanjeev Gupta for $34m only a few years back.

But on to this NTA bizzo. In January the number released was 420.82c (after tax); in February it was pared back to 397.78c, a difference of 23.04c per share.

These are not numbers that need to be memorised, so just relax.

For now, just remember 6.95c.

The Potts Point mansion Bomera, which was sold by Leanne Catelan.

That’s the difference between the February pre-tax figure of 413.87c and the January after-tax number of 420.82c (we reckon it’s actually a pre-tax number and will explain why in a tic).

Here’s the point.

On the numbers it seems that Excelsior accrued a $4.66m tax liability.

That liability was obviously borne out of the $92m sale of Excelsior’s cables business, CMI, except it doesn’t appear to be accounted for in the January NTA, even though they factored in the cash received. So, what gives?

They’ve provided one but not the other.

As the little Old El Paso girl once said: “Why don’t we have both?”

This weirdness means, well, it means the January figure mightn’t have been accurate, and we can only guess how many shares were traded between the release of that number and the February number based on inaccurate NTA information. Tsk tsk tsk.

Let’s keep going.

On that basis, January’s reported after-tax NTA figure of 420.82c is more likely a pre-tax figure, and the 6.95c difference with February adds up to a smidgen over $2m (based on the circa 28.994m shares on issue).

We already know half of that $2m was flicked out to shareholders in that crappy 3.5c dividend.

But, ah, what about the other million?

Where’s that gone?

One suggestion out of the February NTA statement is that some of it was cost-related to the CMI sale, but was it?

Shareholders deserve to know.

And again, shouldn’t that cost have been accounted for in the January NTA statement?

But it’s also possible that some or all of the missing $1m might have been desaparecido’d in Excelsior’s lacklustre investing strategy.

As Margin Call has already noted, ECL lost millions over the last seven years, a period during which Australian shares returned 80 per cent and international shares 118 per cent. The company was contacted for a response.