APA Group isn’t Google, it’s not Facebook, Amazon or Microsoft either. It hasn’t invented an industry-changing, revolutionary new technology. It runs boring old gas pipelines.
So how can a boring old gas pipeline company which most Australians wouldn’t know from an outer-Mongolian long-eared jerboa, deliver sharemarket returns of 1304 per cent over 15 years?
Keeping a low profile and stinging its customers hard, that’s how. A mostly compliant, compromised and sophomoric financial press helps too.
Don’t get the wrong idea, this has been a thing of beauty for investors. That’s good. But this party has gone on for too long; and, for gas customers, it has been a shocker.
Last year, gas analyst Bruce Robertson revealed here at michaelwest.com.au the absurd paradox that consumers in Japan were paying less for Australian gas than Australians were paying – that’s after liquefying it and shipping the stuff 7,000k.
Finally, the competition regulator began to address the issue last year. A recent report by the Australian Competition and Consumer Authority (ACCC) found that effective regulation of the gas pipelines business would bring a drop in city gas prices of up to $1 a gigajoule. That is roughly a 12 per cent fall in the average price of gas.
Pipelines are just part of the problem. The oligopoly of gas producers is just as culpable. Yet these are big savings. Monopoly pricing in Australia’s pipelines sector is slamming not just consumers but business too, leading to a spat between the boss of junior gas producer Central Petroleum and APA chief Mick McCormack.
Central’s chief Richard Cottee accused the pipeline operators of monopoly pricing late last year. If prices were lower, he said, producers would be incentivised to bring on new supply.
APA chief Mick McCormack shot back: “This stuff belongs in fantasyland.
“Ridiculous, untested, ignorant and clearly self-interested arguments designed to wind-up an anti-APA feeling,” McCormack said of Cottee’s claims. “This is a flea-bitten nothing”.
Well, if it’s a flea-bitten nothing, Mick should have no problem with the ACCC introducing a regime of pipeline by pipeline accounts as they do in the US. Transparency is superior in the US and gas prices far lower.
Australia is swimming in gas. There is a problem. Transparency is the solution. And to be fair to APA, its pipeline peers are making a killing too – Jemena and CKI, both foreign players, and Duet, another stapled security like APA.
So we have an oligopoly of foreigners who are not keen on paying a lot of tax in Australia and two trust structures (Duet and APA) who paying very little at all (it is incumbent upon their members, many of whom are domiciled in tax havens and wouldn’t pay much either.
Australian gas consumers are being toasted on both sides.