Statement of Receipts and Payments of the Consolidated Fund and ...

gjYTHFR COMMITMENTS
(a) Delay Cost Compensation Payment
Commencing in 1991-92, the Government undertook to provide an armual grant of $6
million to the Portland Smelter Unit Trust (PSUT) to fund the annual amortisation of the Delay
Cost Compensation Payment (DCCP). The armual grant will apply in those years where the
profits of PSUT from the sale of aluminium or other sources are insufficient to cover the annual
amortisation of DCCP. Appropriations were included in the 1991-92 and 1992-93 Budgets for
these grants.
Based on the present arrangement, a commitment arises for the Government in respect of
future year's grants. However, in the event that a proposed financial restructuring of the PSUT
proceeds, annual grants may no longer be required.
(b) Flexible Tariff Management Unit Trust
Flexible Tariff Management Unit Trust (FTMUT) is responsible for meeting the
Government's obligations to the State Electricity Commission of Victoria (SECV) to make and
receive payments in relation to flexible electricity tariffs for the PorUand and Point Henry
smelters. These flexible tariff arrangements are set out in detail in Victoria, The Portland
Aluminium Smelter of August 1984. The units in FTMUT are owned by the Treasurer with the
State Trust Corporation as trustee.
These arrangements were entered into in consideration of the SECV renegotiating the
supply of electricity for the Point Henry and the Portland smelters, so that electricity would be
supplied under a flexible tariff which would vary according to the level of world aluminium
prices. The flexible tariff was designed to ensure that over the long term the average tariff paid
by the smelters would be equal to the SECV's base tariff. The Government bears the cost and
receives the benefit arising from deviations of the actual tariff from the base tariff.
Because of continuing low aluminium prices, the Government was required to make
payments under the flexible tariff arrangements in 1990-91 and 1991-92. These payments were
financed by a loan guaranteed by the Treasurer from the Victorian Development Fund (VDF).
At 30 June 1992, the loan balance outstanding was $280.3 million. Based on the current low
level of aluminium prices, further flexible tariff payments of up to $200 million will be required
in 1992-93. This will be principally funded from borrowings. However, an amount of $121
million is included in the Budget estimate in 1992-93 to meet payments of principal ($80 million)
and interest on the funding ($41 million). Given current forecasts of future aluminium prices,
payments under these arrangements are anticipated to continue in the medium term.
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