Desalination contract done – remember the name Blue Water Consortium

…’cause my guess is that they’re going to be in the news a lot, from here on out (or, if you’re a Living End fan, in).

An aside: I’m bothered less by the loudness of the music emanating from what had bloody-well better be a neighbour’s party than I am by how lame it is.

Back to the water: construction begins in a month at the oft-discussed site of Kurnell:

Construction costs are AUD730m for the plant, and AUD230m for the intake/outtake…valves? Pipes? For the seawater. We’re told that is less than estimated. A few things,

(1) this was a tender for a huge goddamn contract. I remember reading a story about (I believe) Neil Armstrong, sitting in the cockpit of the Apollo flight that would take him to the moon, exclaiming, “Oh God, I’m sitting a low bid.” Just like RailCorp, just like Metronet, one wins government contracts by beating other bids. Once you’re half-way built, or desalinating the water, your problems become the State’s problems.

(2) The Premier commented that the lower costs would mean lower water costs for Sydneysiders (that’s what we call ourselves. Or them. You’d have to ask someone living there whether or not I count).

“The lower cost is expected to lower the anticipated increase in consumer water bills to less than $2 per week,” he said.

Bad move. I don’t want to upset my parents, but water in Australia is too cheap. For a country with almost no rainfall and heading for a dustbowl, it is way, way too cheap. AUD2 per week? It should be AUD2 per kilolitre. The plant will turn out some 250ML per day (twice the original plan – apparently it will ‘drought-proof’ Sydney). Last Friday we used 1300ML. Last Thursday, 1290ML. Wednesday, 1250ML.

(3) Also announced was the preferred tender for recycling. Now follow this, as Iemma begins to spend (minimum) AUD1bn-ish on desalination. The Western Sydney Recycling Project should, by 2015, by recycling 50ML per day. This is in line with the Premier’s goal of recycling around 11% of Sydney’s water by then. That’s not now. I can’t seem to find today’s figures, and it’s too late at night for me to sift through a blog titled Water Recycling in Australia (although it is very good). Clearly I’m not in charge, but it strikes me as odd that the government seems at no point to have stopped and wondered whether we should try something else before desalination – say, more recycling?

(4) This is costing AUD1bn to build, not to run. Reverse osmosis is bloody energy-intensive. Estimates I saw vary a bit, but 10kW per cubic litre is not unreasonable (return to the water recycling blog for numbers, costs). ‘Green’ doesn’t exactly describe the plan, but then neither does ’smart’ or ‘good’.

These costs also don’t seem to include discussion of expansion costs, if/when necessary (and at the rate Sydney is expanding, I’d say so). But I read a story not long ago about how Australia’s drought/water shortages would cause electricity shortages next Summer. Be no end of amusing if we instead get those rolling brown/blackouts because of the provision of water.

Clearly I’m anti-desalination. I think it’s a bad idea, and bad policy undertaken by a State government that likes big projects (cross-city tunnel, anyone?), likes claiming job-creation, or just is too bloody lazy to think problems through and go for complex solutions to complex problems. I don’t know, and it’s not going to be my taxes, rates, water bills or energy shortfalls paying for the daft idea.

Don’t be afraid of the census

Back in 2005, early in my English sojourn, I came upon a neat story about seeing what the houses of your neighbours were worth.

A new website which tells surfers how much people paid for their homes claims to have had 50m requests in just six weeks.

Nethouseprices.com gives information from the Land Registry of England and Wales and Registers of Scotland about the selling price of residential properties bought since April 2000.

Full disclosure – the story I remember was far more entertaining. I think it ran in the Times of London, not the Guardian, but that was the only one I found in my lazy News Googling.

The point is this story in today’s Australian (actually tomorrow’s Australian – datelines are fun!). The story? The Australian Bureau of Statistics has said it would release data from the last Census, online. For free. This Wednesday. Leading the Australian’s Stephen Lunn to create the Citizen Statistician (the actual motive for the article, I think – which is fair, that is kind of cool). He also used the term ‘helicopter over’ – what the crap is that?

As the journalists look to helicopter over the data on Wednesday in their attempt to define the Australia we all live in and can expect in the future, Citizen Statistician can hop online and zero in on the characteristics of their own suburb, and whether they come in under or over the median line.

Looking over the virtual back fence has never been so revealing.

The data released will be disaggregated down to the level of Collection District (meaning you will get totals/averages for collection districts, not addresses, individuals or postcodes):

The Census Collection District (CD) is the smallest geographic unit of collection. Generally defined as an area that one Collector can comfortably cover delivering and collecting Census forms, there are on average around 225 dwellings per CD, and around 38,000 CDs in total in Australia. In 2001, Census CDs in major cities were altered where possible to conform to suburb boundaries, allowing census statistics to be produced for these areas.

I also learned (from an anonymous anonymousaur at the ABS who will remain …not known) that those killer-chic ABS trendies (it really is worth reading the article) will introduce into the good data random error (i.e. bad information, and extra, non-observed invented information) when something is being given away. Meaning that if you’re afraid you’re the only muslim in your street and everyone will learn how much you earn, what your health is like, your wife’s age, etc. don’t be. For a start the data is unlikely to give that away, and if the people who gathered suspect that it will, they’ve invented white noise to cover you.

I’m not suggesting Stephen Lunn either expected or recommended paranoia – I think he wanted to write about how non-dorky the ABS is (?) and use the words Citizen Statistician. But I can see it happening – I’m surprised the media hasn’t had a go at it themselves, although I can understand them finding this sort of thing, rather than simple stereotyping, generalising and pigeon-holing. I look forward to A Current Affair and Today Tonight’s race to find the first family in Australia hassled based on some racist wanker finding something in the databases.

Google and eBay BFF again

While pottering around at Business Weekly.

And thus ends an amusing couple of weeks of blue chip churlishness and childishness. I wonder what they learned. Google ultimately abandoned its plan for the party that started the spat in the first place. EBay has learned it needs its partner-in-internet-traffic Google after all, else it would not have returned. They also seemed to have learned that they don’t need AdWords as much as they may have thought – it’s going to spend less than the previous USD25m, instead spending more on AOL, Yahoo and Microsoft.

Nobody has counted hard losses – USD450,000 per day in revenue for Google, 10% of traffic to eBay (although it only fell 7% – due to what were called organic results, when a google search comes up with eBay anyway, AdWords or no AdWords).

According to MSN’s Money Central they had different market reactions to the spat, specifically: eBay’s share price reacted poorly (it was the 15th):

:

While Google’s reacted well (if it was reacting at all)

Both share prices responded positively to the reunion – eBay yet to return to pre-tantrum levels, indicating that perhaps the market doesn’t agree with them about the emancipation from AdWords of its incoming business. Google’s share price mostly did its own thing for the period.

Bear Stearns again, and Private Equity vs. Hedge Funds

The weblog Calculated Risk has a post up about the Bear Stearns saga, such as it is. I didn’t know conventional wisdom was blaming sub-prime mortgages, but I don’t tend to spend much time on agents of conventional wisdom (like the New York Times). Just enough to find out the bits I need to look elsewhere for details. Which is professional of me, since I linked to the same NYT article. No, wait! I don’t do this professionally anyway. As you were.

I was at least gratified to see someone else relatively unsympathetic (so too the Big Picture) to hedge fund clients’ dissatisfaction with the already enormous returns they were getting on the debt in which they were already investing. And hence demanding higher returns still (dicks. I mean seriously, do they think their fund manager is just being lazy and not shaking the money tree hard enough?). So higher yields means riskier debt (or, in this case, the scary-ass Frankendebt of CDOs), and …and… This shouldn’t come as a surprise, is my point. Hence the lack of sympathy.

But trying to put the story out that it’s the fault of the sub-prime lending market is a bit much. Irrespective of the pseudo-downward-reaching (I learned that term today, reading about the nasty Dick Cheney) squeeze being put on them (we look forward to housing numbers this week).

The Big Picture also put me on to an interesting story about how private equity is hurting hedge fund money-making, by making big plays for troubled firms (hedge funds formerly making loads of money by selling short – essentially betting that the firm would go down and/or under). In the process, they send the stock price back up, and hedge funds lose their gamble. The rabid nature of takeover activity from private equity (even as private equity will eventually run out of targets) generates takeover speculation from firms that get into trouble while having any sort of possibility of redemption.

Again, I don’t like this because it is incredibly destabilising for the firms, the employees, and whatever it is that firm may produce – don’t forget, the strength of our economy and stock markets still relies upon us making and selling things, and we need some stability in our ownership, management, suppliers, job-security, etc. for that to happen. On the other hand, of course, the old ’system’ was Firm Goes Under, Hedge Fund Wins Gamble. Which probably wasn’t that much better. I suppose it’s a matter of perspective. I still prefer mine.

A neighbour is clearly watching a sporting activity of some kind. I certainly don’t wish for his exuberance to have an adverse health effect, but I do want him to shut the hell up.

What is Delphi to GM?

Delphi, Union Reach Tentative Wage Pact. I have found Google News a terribly entertaining method of seeing who gets their news from where – you can see the same title of an article repeated again and again.

GM spun Delphi (parts manufacturing) off back in 1999. How tied are they to getting Delphi out of bankruptcy (for which they applied as far back as 2005)? Court protection, while still operating, is all well and good, but a firm has to go one way or the other. Con: Delphi is GM’s largest supplier of parts by far – meaning GM doesn’t want Delphi to go under, or it will need to rejig its supply line. Pro: GM, as part of the spinning-off, pays Delphi a premium over market prices, to the tune of some USD2bn (I’m a little hesitant to use CNN as a reference, having learned that they can’t read a map, but I’ll assume their money people are smart enough). Con: Big Con, in fact; GM, from the original deal, also agreed to cover retirement costs for GM employees that went with Delphi if Delphi proved unable to do so. It has been estimated that these retirement costs are on the order of USD7bn.

A bankrupt Delphi would have cost GM some USD11bn. Now, GM will stump something like USD500m, transition payments of USD100m and ongoing costs (wage subsidies) of USD300m to USD400m. In exchange for which it will reduce that USD2b kickback on prices. GM is saying it’s much happier with this deal than the old one. For a start, taking out the risk of bankruptcy means GM doesn’t have to put its own restructuring on hold or worry about that USd11bn. It should also be saving money on the new payments arrangement with Delphi.

Downsides? Delphi workers’ wages, for a start. USD27 down to USD18.50 (maximum) per hour. This is mostly pre-2004, since hires after then were temporary/casual (someone saw writing on the wall). I complain, though – I’m not an auto worker:

“If it means I have a job for the next five years, that’s great,” said Scott Reed, 33, of Owosso, who works at Delphi’s Flint East plant and was hired at the lower wage. “As long as I have a job with benefits, I don’t care about anything else — except that we stay part of the UAW, too.”
…
While the union could not avoid concessions, it succeeded in keeping some plants open that were targeted for closure, and the wage terms are significantly better than Delphi’s original offer soon after it filed for bankruptcy.

This also means Delphi will follow Chrysler now and sell out to private equity – which is the noteworthy part. Chrysler’s sale wasn’t all that popular, at the time. This is, by and large, a good deal for GM, and a good deal for the auto industry (getting it out of the way before contract rounds with the Union of Auto Workers later in the Summer) but a good deal for Delphi? Hard to say – none of this relates to what their new owners might do to it. Their standard approach (think Richard Gere in Pretty Woman, without the redemption) does not bode well, nor does their persistent circling of failing auto firms.

Auto unions are still pretty strong, so the chances of massive cost-cutting, on-selling, etc. are lower, but private equity works by buying struggling – presumably under-performing – companies, cutting costs/improving productivity and then selling the more profitable company. In auto manufacturing, that pretty much means labour and the workforce. The UAW already blocked a bid for Delphi by equity firm Cerberus, because they’d stated a desire to do exactly this. It also has 51% in GMAC, the off-spun financial services part of GM.

The union also had an interest in blocking such deals because the concessions equity firms seek include avoiding healthcare and retirement expenses (which is where our interest in the the auto industry began) – potentially shifting it to unions. The unions don’t want USD11bn of health and retirement obligations either. Who would? It’s possible they can all (UAW, GM, Ford, Chrysler) come together this summer and work out that joint-financing deal they’ve been discussing. Personally, though, I’m not all that sure it’s a good move forward to strip these obligations out of the companies and let private equity toss them around amongst themselves like an independent asset.