Mea Megathread

[Chinahand]

Replying to Butterfly etc

 

We are reaching the end of publicly available information. You'd expect politicians to be asking questions like the ones you are asking to get the information out there, but they aren't.

 

I'm as certain as I can be that over the lifetime of the assets (30 years for the power station cable and FOC, 60 years for the pipeline) they will generate more than enough cash to pay for the £300 million they cost to build and the £50 million odd they will cost during their initial years. But who am I to say; why doesn't somebody ask the MEA?

 

Why are they loosing money in the first 5 to 10 years running: two reasons.

 

One: the MEA has put in investments to deal with power demand out for 15 to 20 years in the future; these are large assets and they've been designed to be optimized on power loads the IOM doesn't yet have. That's not so odd; you'd be crazy to replace old assets with identical assets when you know you're in a growing market!

 

Two: Increased fuel costs.

 

The MEA always knew they were going to loose money in the initial years due to reason ONE: check out the last page of the MEA 2003 business plan (prepared in 2002) at

 

http://www.gov.im/cso/plan/2003/

 

In it they report looses before capital spend of £13.7 million in the years between 2005 and 2007. Its annoying because the capital spend figures don't go out to 2007, but if you add in capital spend between 2004 and 2006 the MEA, in 2002, was reporting it needed more than £17.5 million over and beyond what it was generating itself.

 

BUT look at fuel costs: £7 to £8 million.

 

I am reliably informed that MHK's were told by the MEA that the fuel bill for this year would be £19.2 million. If you put the fuel bills that we are expecting now into the 2003 business plan it would show looses of £60 million between 2004 and 2007; pretty much what is happening now. As Eddie Teare said on Manx radio, the problems are mainly to do with fuel prices and little to do with the infrastructure.

 

So the MEA were sitting on an economically viable infrastructure project; albeit one which cost a lot more than the indicative figures put before Tynwald in 2001 and one where the profits have been massively reduced due to higher than expected fuel costs: but it is still an economically viable project. What do you think they are going to do?

 

As early as 2002-3 they knew they were going to be needing additional funding in the period starting about now. One thing that makes me sick is listening to Bell saying Treasury weren't informed about what was going to happen. Didn't they read the Business Plans presented to them!!

 

Did the group of businessmen running the MEA sit around doing nothing in 2004 while waiting for Mr Bell to ride in on his white horse?

 

Can someone also ask what work the MEA were doing with the major banks to convert what they've always described as INTERIM financing over to a long term basis?

 

If you've an economic project (using a financial term: one with a +ve NPV) but you need cash to smooth out the looses then a financial organization should be willing to lend you the money.

 

Was the MEA really just sitting around doing nothing in 2004? Or were they talking with Barclays, HSBC, the Isle of Man bank etc (as they'd done in 2003 with the interim financing) to sort out a long term finance package? And did all this work to smoothly provide finance via the private sector at no cost to the Isle of Man Tax Payer get wrecked by Treasury creating a drama out of a crisis?

 

I'd really like a politician to ask for the MEA's business plan 2004 and ask if the MEA were preparing private sector finance to cover the current looses. If they were then all the drama about cancelled schools and projects is just politicians playing with themselves: create a drama, show yourself riding into the rescue, warn about future difficulties and then in the future be able to announce all the goodies are still available, but only because of your great work. Great way to get re-elected.

 

Cynical aren't I!

[crumlin]

China

 

The interest payments on the loan are about 2.5 million more per year than the MEA turnover pa

[Chinahand]

China

 

The interest payments on the loan are about 2.5 million more per year than the MEA turnover pa

<{POST_SNAPBACK}>

 

 

Rot

 

Check out: http://www.gov.im/cso/

 

PKF report p 75

 

Projections for year ending 31st March 2006

 

Turnover £51,072,000

 

Interest Payments £17,488,000

 

The main issue is that 70% of the MEA's costs will grow at inflation or less (interest payments are fixed once the Interim financing is rolled into the bond and so will become increasingly less significant over time), while units sold will grow by approximately 4% per year throughout the 30 years of the stations life and prices will grow at 2.5% above inflation for the next 5 years and so and at inflation above that.

 

See the interesting costs graph on page 77 of PKF shattering all your assumptions about the Island's costs of electricity: after 5 years of price rises electricity is still cheaper than it was in 1990 in real terms.

 

If you take inflation to be 3.5% on average for the entire 30 years that makes turnover grow at 10% per year while costs grow at only a little over 3.5%. The back of the envelop analysis starts with costs of £70 million and revenue of £50 million put in the cost and growth assumptions and its really easy to work out and its massively positive.

 

Obviously its more complicated than constant assumptions over time, but if you do a monte carlo simulation and alter the growth and inflation rates etc the money is secure in all but the most unrealistic scenarios.

 

Go figure!

[ManxWarrior]

Update 21/8/05 - My apologies to previous ref to KPMG.

 

Ref the PKF report of July 2005.

 

The section which concerns me starts in section 14 Page 145, ‘Skyward’

 

The pedigree of PKF is good I won’t ask for company checks this time, but big guns can be engaged to bury information whilst simultaneously making it publicly available. Remember the UK government burying bad news on disaster day? He who pays the piper calls the tune. In this case it’s the Treasury paying the piper.

 

PKF have shifted thro all minutes of relevant meetings which gives an incite into the workings of Government. It helps to place the facts in chronological order.

PKFChronoSeq.txt

(Sorry you may have to right click and download each attachment.)

 

Here’s my own fly on the wall interpretation of the information which may start to explain one or two things.

• The DTI take out a 30year lease on the FOC for £390k/annum from Manx Cable Co, (MCC) owners of the FOC.
  FOCLease.txt
  
• DTI had the lease for 2 years during which they built the Network Operation Centre (NOC) but couldn’t get get Treasury approval for the schemes to light the cable.
  

1. Why trouble to build a NOC without a valid business scheme?
   
2. What were these schemes?
   
3. Why did Treasury refuse?
   

• Note info about NOC is not in PKF but it is known to me.
  
• The DTI are stuck with the 30year lease, so they come to a deal with MCC whereby they are released from the terms of the lease on condition the DTI get a bill thro Tynwald to enable the MEA to supply Telecoms including Broadband & Mobiles to public. Maybe they thought they could bypass Treasury?
  
• The bill is duly raised and passed. Where the MHKs aware of the deals?
  
• The MEA/MCC go into overdrive setting up the Skyward Committee awarding themselves additional salaries, hiring consultants etc. In the process they get thro £1.7million! Knowing the capacity of the cable, they were thinking big like Storage Area Networks (SANs) and any other high bandwidth application. They appreciated that in order to make the FOC highly profitable they had to move beyond the ‘bread and butter’ applications of Broadband & Mobiles. Mike and the Skyward team were acting like super sales people with a flamboyant life style to match which proved their Achilles heel. I can sympathise with onlookers, here it was all too far to fast.
  
• The DTI disagree with the ambitious plans and announce Skyward should only be able to sell capacity to existing service providers i.e. not directly to the general public as per the Act of Tynwald. The DTI preferred the slower incremental approach. The Act says its subject to DTI approval. Did Treasury already have DTI in pocket at this stage?
  
• MCC cry foul, that wasn’t the agreement. “You agreed public Broadband & Mobiles” – and the lease deal stumbled.
  
• The Comms Commission chip in and announce they won’t give MEA a license anyways.
  
• Mike always thinks big and undaunted proposes to buy existing provider MT, who already can sell to public and have a license.
  
• MT not for sale say O2 unless a premium price is paid. In other words offer more money and we’ll talk.
  
• MEA release Vision 2010 business plan to DTI & Treasury. Given, I suspect, the grandeur of the plans it scared the pants of the Establishment. It was doomed before touching the desk.
  
• Treasury pull in GOS Consulting to blow out the V2010 business plan.
  
• MEA submit revised business plan, still blown out by the consultants, surprise-surprise. Stale mate.
  
• Gaff-blown on Power Station borrowing activities. Treasury now have something to really hammer Mike with. He surrenders and so does the rest of the MEA board. Treasury appoint new board and now have the whip hand. Game won by Treasury in penalty shootout.
  
• Current situation - DTI not legally released from terms of lease but had already stopped paying the £390k. DTI legally in deep sh*t (broken terms of lease) legally owe some £15 to £21million to MCC. DTI totally in Treasuries pocket and been ordered to keep stum – hence very quiet.
   
  
• Standing Committee see the whole FOCing fiasco and try to find a way forward.
  

Now that Mikes gone, everybody has a scapegoat, can we move forward?

 

Have Treasury had their fun and can IoM PLC start getting some benefit?

 

Do Treasury really still want to sell off the FOC, probably the greatest asset the IoM has ever owned?

 

Should I order Mr Bell a headstone from Stoney Mountain now?

[Alias]

About broadband over power: are the powerlines even shielded?

[ManxWarrior]

Remember that stuff about FOC capacity that I was banging on about and that nice Mr Ans challenged my figures, well I’ve found a reference on the Government website.

 

 

The biggest benefit the island offered to Dimension Data was its state-of-the-art telecommunications and world-class regulatory standards. Over the past two and a half years, the Isle of Man’s government had invested over £22m in e-business developments, which is a significant investment for an island of only 76,000 inhabitants. The government also had the vision to upgrade telemetry fibres to the Isle of Man, with the main fibre link to the island having a 1.2 terabits capacity, which is capable of carrying up to 10 times the current North Atlantic internet traffic.

 

 

Edited by Mission - if you don't like the way the forum is moderated, please feel free not to post here. We don't have to put up with the tripe you've been spouting about us in this thread.

[ManxWarrior]

Just been looking at how many MF Moderators there are - well actually 10.

 

Firstly I think we should rename them into MT Moderators.

 

Hmm.. wonder how many shift people run the MT Network Centre?

[ManxWarrior]

Butterfly Maiden – sorry can’t really answer your questions – just have a very serious think about whats been going on here and whos cages have been rattled.

 

As followup to my last posting perhaps there’s a few more answers to my self posed questions:

 

Concerning the initial install of the FOC and DTI etc etc – Well one obvious answer which I have completely overlooked is that the cable had been promised to certain parties by Treasury from day1 and perhaps even had been installed with that in mind. It may have been the genuine efforts of some civil servants that managed to keep it in the public domain. If true that’ll blow yer socks off. Certainly Treasury have managed to throw up some incredible smoke screens with this borrowing stuff. Makes yer think doesn’t it?

 

But even more shattering is the notion which was put to me that they gave a certain Minister the job because they had so much sh*t on him that he would be a perfect sockpuppet. The real power lies with the faceless ones within Treasury who had decided the outcome of the FOC in the first place. Just think about what strings are being pulled by whom and for what reason. I can give you millions of good reasons. Its what I’ve been banging on about in this whole thread. Perhaps the beleaguered Mike Proffitt genuinely was a good guy? Btw – I have never met , spoken or have any connection with him.

 

I think all the pieces of the puzzle are in place. Its up to the MHKs to see the picture and decide on a way forward.

 

Edited by Mission - if you don't like the way the forum is moderated, please feel free not to post here. We don't have to put up with the tripe you've been spouting against the moderation team in this thread.

[ManxWarrior]

As followup to my last posting perhaps there’s a few more answers to my self posed questions:

 

Concerning the initial install of the FOC and DTI etc etc – Well one obvious answer which I have completely overlooked is that the cable had been promised to certain parties by Treasury from day1 and perhaps even had been installed with that in mind. It may have been the genuine efforts of civil servants that managed to keep it in the public domain. If true that’ll blow yer socks off. Certainly Treasury have managed to throw up some incredible smoke screen with this borrowing stuff. Makes yer think doesn’t it?

But even more shattering is the notion which was put to me that they gave a certain Minister the job because they had so much sh*t on him that he would just act as a sockpuppet. The real power lies with the faceless ones within Treasury who had decided the outcome of the FOC in the first place. Just think about what strings are being pulled by whom and for what reason. I can give you millions of good reasons. Its what I’ve been banging on about in this whole thread. Perhaps the beleaguered Mike Proffitt genuinely was a good guy? Btw – I have never met , spoken or have any connection with him.

 

I think all the pieces of the puzzle are in place. Its up to the MHKs to see the picture and decide on a way forward.

[Chinahand]

One question to anyone working in the finance sector: what role does the FSC have in monitoring loans etc? As guardians of the Islands financial sector you'd assume they'd be very concerned about the only major commercial bank with its headquarters in the Island giving out illegal loans.

 

Funny thing is ... I've heard rumours that the MCC loans were all fully reported to the FSC who didn't bat an eyelid ... I've no idea of the role of the FSC so maybe this is just people boasting in the pub ... Do banks etc report their loans to the FSC? ... I'm not clear.

 

Isn't the FSC directly tied in with Treasury? But Treasury claims they didn't know a thing ... Seems a little odd.

 

Does anyone have any knowledge they can share with the rest of us?

[ManxWarrior]

Further thinking re PKF report.

 

The original MEA Vision 2010 was presented to DTI by Dr Retief (14.13)

DTI conducted its own review on Vision2010 and then passed on to Treasury.

 

I reckon this internal review by the DTI may have been favorable to V2010 but the Treasury weren’t happy with this, so GOS Consulting was engaged to blow out V2010. The MEA then submitted a revised V2010 which was given to DTI and shared with the Treasury.

 

GOS came back to blow out the V2010 again.

 

Later (14.14) enter PKF, they are ‘informed’ by the MEA (ie spoke to them) and are given a final copy of the GOS report (presumably by Treasury) which they are happy to paraphrase bad news from. PKF admit they haven’t seen V2010 and fail to mention, any further, about the DTIs own review. Perhaps knowing the contentious circumstances they either should have investigated more deeply or have taken a neutral stance, but they chose to come in on the side of Treasury.

 

Trouble is none of these four reports are in the public domain, Isle of Man Government can we have these reports posted on your website? Any forum members willing to post em? Its my guess the DTIs report is most honest comment on V2010 and is therefore key.

 

So whose case are PKF promoting? Treasuries perhaps?

Who are PKF working for Treasury or Council of Ministers?

Can PKF now be seen to be independent?

 

To quote from ‘Virginia P’ “the odour of Rattus Norvegicus filled the air”, that a brown long tail to us good manx folk. Cheers Virginia.

[ManxWarrior]

The PKF report (14.20) mentions that MEA have filed patent applications for Power Line Communications (PLC) technology. I can’t find much about this subject on the Government website but Hazel Hannan did ask the Treasury a question in Tynwald:

 

http://www.tynwald.org.im/papers/hansards/.../th12072005.pdf Hansard 12/July/2005 written Answers by Treasury.

 

58. The Hon. Member for Peel (Mrs Hannan) to ask the Minister for the Treasury:

(1) Has the Manx Electricity Authority patented internet broadband access through the ‘mains'; and (2) if so, does the system work and can it be used by Government to recoup monies expended without Treasury approval?

 

Answer: In answer to the first part of the Question, the Authority cannot patent internet broadband access over the mains, as the technology to do this exists in various forms with various patents. I understand that the MEA has a patent in respect of a mechanism by which the communications signal is injected into a high voltage cable for onward distribution. In respect of the second part of the Question, whilst I am no expert in this field, my understanding is that whilst sending data over power lines is technically feasible, and can be shown to work in test environments, there are issues around radio interference that have yet to be resolved and, as such, this remains unproven technology in respect of a full scale commercial application. The MEA do not agree with this assessment and have indicated to us that the patented technology is already attracting outside interest that may lead to licensing deals and, ultimately, future revenues. Therefore, I can only suggest that the Hon. Member contact the MEA if she wishes to learn more about the latest position.

Mr Bells answer is really a bit wet and is based on out of date technical info. These are facts:

1. PLC is running in several countries on a commercial scale.
   
2. Radio Interference is not a problem. (see my previous postings).
   
3. It is all proven working technology, being able to currently deliver upto 150mb/second.
   

Why is Mr Bell promoting this negative attitude to PLC Technology?

 

What Mrs Hannan was really asking is how much are the patents worth to IoM Public Co?

 

To get the answers I have spoken to a number of companies in the PLC business. All companies I spoke to were aware of Dr Retiefs work and the subsequent patents. All are keen to license the technology and pursue its application. These are some facts:

• The Patents are especially useful in countries i.e. Africa, China, India, South America, Eastern European or others which may have older style electrical infrastructures. The Patents make installation of PLC a comparative breeze in such countries.
  
• Countries with low per capita fixed line telephone installations are about to skip the generation of telephone lines and go directly to broadband using either PLC or wireless technology. The PLC business community is seeing the huge potential of such markets.
  
• Depending on how the MEA structure the licensing of the Patents it was said to be potentially worth millions possibly tens of millions in the longer term. Obviously companies wanting usage of the Patents are trying to negotiate the price down.
  

Why should Mr Bell give such a miss informed, negative and evasive answer to Hazel Hannans quite probing question. It took me a couple of hours to establish some real facts.

• Doesn’t Mr Bell have access to similar technical info?
  
• Why does the PKF report underplay the Patent legacy?
  
• Are PKF following the Treasury line?
  

Mike Proffitt and Dr Retief have been vilified by PKF Report and Treasury but I believe they have potentially left IoM Public Co a very generous legacy with the Patents. They could perhaps have not bothered registering the Patents in the first place? Once again maybe we should be seeing Mike & Co has local heroes?

[joeyconcrete]

While PLC is an emerging technology and is already used in some countries you forget to mention that it's also been snubbed in others (Japan for instance). From what I've read the later generation wireless technology and even specially design 802.11 networks are very popular in the lesser African states and Middle East (Iran, Iraq). The spectrum licensing is very relaxed so it allows companies to operate mass coverage networks, also given the crap, dated telecoms infrastructure many states are embracing VOIP (Although some are also banning it entirely). PLC is, and will be in direct competition with the 802.16a and 802.16e (due 2006) wireless standards, although they may complement themselves.

 

Personally I'd like to see the MEAs vast fiber network put to use, the FOC and then some Local loop umbundling offering ADSL2+ or even ethernet to the home. Its all part of the chain though, high bandwidth connections to the home are useless without affordable off-island internet.

 

How does the MEA move forward now the board and Skyward people have been disbanded as such - isn't there a shift in knowledge now there's essentially a caretaker board who may not know the various details about PLC or FOC - or is this where MT step in.

[Tugger]

As far as Barclays are concerned the loans are legal. They have a legal opinion to that effect, on which they (unlike the MEA) are entitled to rely

[Gladys]

Isn't it about time we found someone who could authoritively argue the oridnary electricity/tax payers' corner in all of this? I know that should actually be the politicians but they seem either unable or unwilling to get to the very bottom of this thing.

 

I really don't understand the technology thing, but it does seem that there is an asset there which is just not being fully exploited to help in this. Why would anyone who has such an asset allow it just to stand idle while scraping around and plundering reserves to meet borrowing obligations?