Court SimonSIMON COURT (ACT): Thank you Madam Chair. I want to bring the attention of the Minister the committee and those people watching at home sitting in their offices concerned to what the Government has proposed and whether it can be achieved. So I want to come back to some of the evidence that we heard at select committee particularly around the status of water entities. If we go and look at clause 15 of the bill—15(1) A water services entity—" it says—"(a) is a body corporate; and" (b) it's accordingly a legal entity separate from the entity's board members the employees and separate from the Crown. This entity is separate from the Crown. The Minister Nanaia Mahuta has said repeatedly that one of the objectives of this reform is to create balance-sheet separation. So what does "balance-sheet separation" mean for those people watching or listening to this debate?Currently according to the Minister the water assets of councils are integrated with all the other councils' assets—that's their roads their parks their libraries their swimming pools and their buildings. And what this bill proposes to do is to separate out the water assets put them behind a ring-fenced new water service entity and say that they are separate now from the Crown and from council and that if they're separate what that means is these water service entities won't be hamstrung or handbraked by all of the debt that councils currently have; they'll be able to raise new debt against these assets so that they can build more infrastructure.In principle that sounds fine. But what the Finance and Expenditure Committee heard was that the Department of Internal Affairs had Standard & Poor's carry out an investigation into the balance-sheet separation and into the credit ratings of these water service entities. And what Standard & Poor's told the Department of Internal Affairs and the Minister knows this because I've asked her in written questions is that if these entities are truly to be ring-fenced from the Crown and councils and have an independent balance-sheet—balance-sheet separation—then their credit rating is based on the amount of leverage and debt they're going to take on. And let's just start with the debt the Government's going to dump into them on day one that's $2.5 billion worth of debt that this Government will have incurred through what they call a no worse off and better-off funding. In other words the bribes they're giving to council—not for three waters stuff right now—they can spend on swings and slides or swimming pools or parks or whatever they like. That's the bribe that this Government's offered councils so that they will agree to participate.But if we look at what Standard & Poor's said if they truly achieve balance-sheet separation they'll be so highly leveraged that these companies will be a high risk and their credit rating won't be the A++ credit rating that councils currently have it'll be a B credit rating—a B credit rating. That's one level above junk-bond status. Now that's in the Standard & Poor's report that was given to the Department of Internal Affairs that was tabled at select committee. These entities will be one level above junk-bond status. So how is it possible that they can continue to access debt and continue to borrow and to fund infrastructure growth when this Government is going to dump a $2.5 billion debt straight on to them on day one without a single new piece of water infrastructure—pipe manhole or pump—being delivered? And it's going to leverage them up with nine to 10 times their asset value in what's regarded as a highly leveraged and high risk transaction. I've had advice from people who work in mergers and acquisition who do this kind of financial transaction and they say you shouldn't do it.Now Minister would you please tell us: can you achieve balance-sheet separation without these entities ending up with a B credit rating one level above junk-bond status or will they still be inextricably linked to the Crown balance sheet? Because you can't have it both ways Minister."