POWER company bosses and state governments, quietly drawing annual dividends from their utilities, have done well from rising electricity prices in recent years, but the other big winners have been foreign multinationals.

A BusinessDay investigation found that frontline pay at the likes of foreign-owned SP Ausnet and Spark Infrastructure has been modest when compared with the dazzling salaries at energy retailers AGL and Origin Energy (see panel).

In Victoria, where the electricity sector has been privatised, it is foreign multinationals which have been the big beneficiaries via a slew of complex management fees that are paid back to related companies in Hong Kong and Singapore.

Spark Infrastructure and SP Ausnet have been engineered to pay management fees to external managers, although Spark paid its Hong Kong parent CKI $51.5 million earlier this year to buy back its own management and clean up what had been a quintuple-stapled security structure.

In the case of the transmission and distribution group SP Ausnet, its parent Singapore Power was paid $90 million last year in assorted fees and related party payments.

Spending on transmission and distribution networks has been the main contributor to rising electricity prices, accounting for roughly 40 per cent of the total increase. As the network providers earn a ”regulated return” on their asset bases, there has been an incentive for them to overspend, or “gold plate” their networks.

Lurking in the catacombs of SP Ausnet’s public documents are two telling disclosures. One, Singapore Power is entitled to 1 per cent of SP Ausnet’s EBITDA (earnings before interest, tax, depreciation and amortisation). In this, it ranks ahead of SP Ausnet’s other unit-holders.

Two, the parent company is also entitled to a performance fee equating to about 1 per cent of all capital expenditure. In other words, a foreign company has provided an incentive for Victoria’s transmission provider to gold-plate its networks – the more it spends the more it earns, and the more the government of Singapore benefits because it owns Singapore Power.

This paradox is an outcome that NSW would seek to avoid as the government prepares to privatise its distributors and its transmission provider Transgrid if it wins a mandate at the next election.

SP Ausnet has paid Singapore Power at least $12 million every year since 2007. This year, the fee based on the increase in SP’s ”Regulated Asset Base” was $6.7 million, struck on a total capital expenditure of $710 million.

The swelling asset base came even as the company drew legal fire over the maintenance of one of its remote power lines, allegedly a failure that may have contributed to the Black Saturday bushfires.

Although it often follows in markets that what is bad for customers, for example higher prices, is good for security holders, as far as the externally managed power companies go this is hardly the case.

It is difficult to see how unit-holders in SP Ausnet gain from delivering Singapore Power a claim over their earnings before interest and tax when the parent already holds the majority stake and benefits through distributions anyway.

Then there are the other side deals. There is a $1 million fee each year just for SP Ausnet to use Singapore Power’s logo. There was also $49 million in IT services fees and other payments relating to property plant and equipment, and simply “other” payments that went to related entities of the parent.

The breakdown last year was a rise of 9.6 per cent in base fees to $27.5 million, $13.5 million in performance fees (up 12.3 per cent) and $49 million in related party transactions (a rise of 23 per cent).

The growth in fees to the parent well outstripped the value delivered to unit-holders. Net profit was virtually static at $255 million, operating cash-flow down 9 per cent at $430.5 million, return on assets 3 per cent and return on equity 8.8 per cent.

The one bright spot was the unit price which rallied 22 per cent to $1.08 during the year, albeit from a low level associated with legal exposure to the Black Saturday bushfires.

Both Spark and SP Ausnet have been pursued by the Tax Office for aggressive tax structures.