Decision To Merge WA State Owned Energy Generator And Retailer Starting To Pay Off

Decision To Merge WA State Owned Energy Generator And Retailer Starting To Pay Off

Western Australia Treasurer Mike Nahan

Decision To Merge Synergy And Verve Paying Off

Victor P Taffa

  • Synergy’s operating subsidy reduced by $557 Million over forward estimates

The improved financial position of State-owned energy generator and retailer, Synergy, is proof the State Government is on the right path in continuing to reform the energy sector.

Synergy’s mid-year financial figures indicate a reduction to the operating subsidy paid by taxpayers of $557 Million over the forward estimates.

Treasurer Mike Nahan said Synergy’s improved fiscal position was a result, in part, of the State Government’s decision to merge the two entities.





“There were many detractors who said combining the State’s electricity generation and retail assets would deliver no benefit, however these results vindicate our decision to begin a process of reforming the sector by merging Synergy and Verve Energy.” Dr. Nahan said.

“Over the forward estimates Synergy’s overheads are forecast to reduce by approximately $137 Million to reflect the streamlined organisation’s structure, changes to the generation asset maintenance programs and lower insurance costs, which are a direct result of the merger.”

“As a result of the merger, Synergy has been able to retire the former Verve Energy debt earlier than forecast which will result in a decrease in the finance costs of $69 Million over the forward estimates.”

“Synergy has also reduced its Asset Investment Program by $35 Million to align with the merged asset management plans for both generation and IT assets. These actions, in conjunction with other cost reductions have resulted in a very good financial report.” Dr. Nahan said.

A post-merger, cost-structure review revealed a significant reduction in Synergy’s cost to supply electricity, which contributes to the more positive financial outlook over the forward estimates.

The early retirement of Kwinana C and improved arrangements for the transportation of gas to Synergy’s retail customers also contributed to the reduction in the operating subsidy.

Despite the encouraging financial outlook, the Treasurer said Synergy would still be subsidised by about $1.2 Billion over the next four years.

“There is still a large amount of work to do to ensure the new business is operating as efficiently as possible, but these mid-year figures reveal Synergy is on the right path.” Dr. Nahan said.

“While the State Government will continue to subsidise residential electricity customers in Western Australia, driving costs out of every area of the sector will ensure future price rises are minimised as much as possible.”

Dr. Nahan also highlighted the savings to taxpayers as a result of the Federal Government’s repeal of the carbon tax.

“Instead of paying an extra $844 Million to the Commonwealth over the next four years for an ill-conceived carbon tax, electricity consumers in the South West Interconnected System have experienced a reduction in the bills by about 8%, depending on their consumption.” Dr. Nahan said.

Fact File

  • Synergy and Verve Energy were merged on January 1, 2014