❓ Opposition questions the Energy Minister about a lost tender by ABB Australia and the weighting given to WA's overall prosperity. Minister defends the decision, citing cost savings and competitive tendering.
AnsweredQoN 815Legislative Assembly
QuestionView source ↗
ABB AUSTRALIA LTD — MINISTER FOR ENERGY'S
LETTER
815. Mr M. McGOWAN to the Minister for
Energy:
On behalf of the member for Albany,
I acknowledge the students from John Calvin School in Albany, who are in the
gallery today.
I refer to the minister's
letter of support to ABB Australia Ltd for its sixtieth anniversary and its —
� important contribution not only to the security of electricity supplies for
the State, but also to the overall prosperity of Western Australia.
Was any weighting for the overall prosperity of Western Australia given
when assessing the tender that ABB Australia lost, including the loss of
payroll tax, land tax, local incomes and local jobs?
LETTER
815. Mr M. McGOWAN to the Minister for
Energy:
On behalf of the member for Albany,
I acknowledge the students from John Calvin School in Albany, who are in the
gallery today.
I refer to the minister's
letter of support to ABB Australia Ltd for its sixtieth anniversary and its —
� important contribution not only to the security of electricity supplies for
the State, but also to the overall prosperity of Western Australia.
Was any weighting for the overall prosperity of Western Australia given
when assessing the tender that ABB Australia lost, including the loss of
payroll tax, land tax, local incomes and local jobs?
AnswerView source ↗
I thank the member for the question,
and I will provide a bit of background, because he skips over the issue. ABB
Australia has been a major supplier of transformers to Western Power and the
electricity industry in Western Australia for some 60 years. ABB is a large
global multinational—probably the largest builder of transformers in
the world, with over 1 200 employees around Australia and, apart from its
Malaga factory, another 100 employees in Western Australia. As with much of the
construction industry, ABB Australia experienced very large growth in demand during
the mining boom. It expanded and contributed greatly to the development of this
state, in both the past and the future.
The contract with Western Power came due, as it does. Western
Power met with ABB Australia numerous times, and the company said that, outside
Western Power, the demand for its services had declined sharply. Rio Tinto was
a big customer, but its contract finished. Most of the expansion in the
electricity grid outside Western Power is finished, and sales on the eastern
seaboard are finished. It has also built a giant new plant in Vietnam.
Mr
M. McGowan : They do a lot of repairs.
Dr
M.D. NAHAN : I am getting there. The Leader of the Opposition asked the
question, and I am answering it.
Western Power's growth has
subsided, but, more importantly, it has told the bidders for the contract that
it will not buy as many transformers because it will recycle, re-use or
refurbish transformers rather than buy new ones, and technological change means
that it does not need as many transformers. Therefore, Western Power's
demand is shrinking, which is good. Western Power put the contract out to bid.
I met with ABB Australia and was told that if we did not meet its cost for the
Malaga plant, it would move the activity to Vietnam. The company bid on the contract,
and was 40 per cent above the cost of the other Australian and New Zealand
bidders. It was $16 million a year above cost for a $5 million contract. I will
do the numbers—that is $80 million.
Mr
B.S. Wyatt : Hang on; $16 million —
Dr
M.D. NAHAN : Sixteen times five—add it up and multiply it. It is $16
million a year for a five-year contract. ABB Australia's bid was 40 per
cent or $16 million a year above the comparable Australian and New Zealand
opposition. It meant that, to accept that quote, which the Leader of the
Opposition said he would have done, would have imposed an additional $80 million
cost on Western Power. Under the laws of the land that govern Western Power,
Western Power has to issue contracts in a competitive manner and take the best
contract for Western Power and its consumers. Western Power has decided—it
is up to Western Power; I do not interfere—that rather than spend
another $80 million on ABB Australia, it will sign a contract with another
Australian and New Zealand contractor.
Let us go back to what this is. The
Leader of the Opposition is criticising Western Power for going out and
competitively tendering, and being more efficient, and deciding to effect $80 million
in savings. The Leader of the Opposition says that, if in government, he would
have directed Western Power—he would have had to do that—to
spend another $80 million to save these 56 jobs. That is what he said.
There are some other aspects of
this. First, Western Power is not confident at all that even if it signed for
the extra $80 million expenditure with the contracted Malaga plant, the jobs
would stay there in the long term, because ABB has just built a giant new
factory in Vietnam. If we lock in our construction and dependency on ABB
facilities—plants and whatnot—and then ABB shuts down the
Malaga plant, we would be stuck. This goes to the heart of the difference
between us and the people in opposition. They are trying to treat Western Power
on the cost front as a cash cow for their narrowly based union constituency.
Mr
W.J. Johnston : There are 80 jobs at stake.
Dr
M.D. NAHAN : There are 56 jobs.
I met with the company numerous
times, and I told it that we are not going to keep the small Malaga plant going
at any cost. I suggested that the company sharpen its pencils, get efficient
and compete, but it did not do that. It just said, ''Here's the
cost of operating the plant; you meet these costs or else we're out of
it.'' The company played the politics, and played the people opposite
like a trick. ABB Australia basically said that Western Power should impose $80
million of additional costs on its consumers because of that. This distils down
to higher electricity prices, which is what the opposition is after.
The
SPEAKER : Wind it up, please.
Dr
M.D. NAHAN : We will be choosing between employing people at 40 per cent
above the cost or hiring people in lithium processing plants that are world
competitive. That is the difference.
and I will provide a bit of background, because he skips over the issue. ABB
Australia has been a major supplier of transformers to Western Power and the
electricity industry in Western Australia for some 60 years. ABB is a large
global multinational—probably the largest builder of transformers in
the world, with over 1 200 employees around Australia and, apart from its
Malaga factory, another 100 employees in Western Australia. As with much of the
construction industry, ABB Australia experienced very large growth in demand during
the mining boom. It expanded and contributed greatly to the development of this
state, in both the past and the future.
The contract with Western Power came due, as it does. Western
Power met with ABB Australia numerous times, and the company said that, outside
Western Power, the demand for its services had declined sharply. Rio Tinto was
a big customer, but its contract finished. Most of the expansion in the
electricity grid outside Western Power is finished, and sales on the eastern
seaboard are finished. It has also built a giant new plant in Vietnam.
Mr
M. McGowan : They do a lot of repairs.
Dr
M.D. NAHAN : I am getting there. The Leader of the Opposition asked the
question, and I am answering it.
Western Power's growth has
subsided, but, more importantly, it has told the bidders for the contract that
it will not buy as many transformers because it will recycle, re-use or
refurbish transformers rather than buy new ones, and technological change means
that it does not need as many transformers. Therefore, Western Power's
demand is shrinking, which is good. Western Power put the contract out to bid.
I met with ABB Australia and was told that if we did not meet its cost for the
Malaga plant, it would move the activity to Vietnam. The company bid on the contract,
and was 40 per cent above the cost of the other Australian and New Zealand
bidders. It was $16 million a year above cost for a $5 million contract. I will
do the numbers—that is $80 million.
Mr
B.S. Wyatt : Hang on; $16 million —
Dr
M.D. NAHAN : Sixteen times five—add it up and multiply it. It is $16
million a year for a five-year contract. ABB Australia's bid was 40 per
cent or $16 million a year above the comparable Australian and New Zealand
opposition. It meant that, to accept that quote, which the Leader of the
Opposition said he would have done, would have imposed an additional $80 million
cost on Western Power. Under the laws of the land that govern Western Power,
Western Power has to issue contracts in a competitive manner and take the best
contract for Western Power and its consumers. Western Power has decided—it
is up to Western Power; I do not interfere—that rather than spend
another $80 million on ABB Australia, it will sign a contract with another
Australian and New Zealand contractor.
Let us go back to what this is. The
Leader of the Opposition is criticising Western Power for going out and
competitively tendering, and being more efficient, and deciding to effect $80 million
in savings. The Leader of the Opposition says that, if in government, he would
have directed Western Power—he would have had to do that—to
spend another $80 million to save these 56 jobs. That is what he said.
There are some other aspects of
this. First, Western Power is not confident at all that even if it signed for
the extra $80 million expenditure with the contracted Malaga plant, the jobs
would stay there in the long term, because ABB has just built a giant new
factory in Vietnam. If we lock in our construction and dependency on ABB
facilities—plants and whatnot—and then ABB shuts down the
Malaga plant, we would be stuck. This goes to the heart of the difference
between us and the people in opposition. They are trying to treat Western Power
on the cost front as a cash cow for their narrowly based union constituency.
Mr
W.J. Johnston : There are 80 jobs at stake.
Dr
M.D. NAHAN : There are 56 jobs.
I met with the company numerous
times, and I told it that we are not going to keep the small Malaga plant going
at any cost. I suggested that the company sharpen its pencils, get efficient
and compete, but it did not do that. It just said, ''Here's the
cost of operating the plant; you meet these costs or else we're out of
it.'' The company played the politics, and played the people opposite
like a trick. ABB Australia basically said that Western Power should impose $80
million of additional costs on its consumers because of that. This distils down
to higher electricity prices, which is what the opposition is after.
The
SPEAKER : Wind it up, please.
Dr
M.D. NAHAN : We will be choosing between employing people at 40 per cent
above the cost or hiring people in lithium processing plants that are world
competitive. That is the difference.
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