ETTA Options Paper 2004
Energy Industry Advisory Group Inc November 2004
The ETTA Options Paper has been prepared on behalf of the:
Energy Industry Advisory Group Inc.
The ETTA Options Paper has been prepared by:
Arrina Pty. Ltd.
ACN 007 437 416 168
Locked Bag 1 The Patch,
Victoria 3792 Australia
Phone: 61 3 97521300
Fax: 61 3 97521400
This discussion paper has been prepared as a ‘Commercial in Confidence’ document for
limited circulation to the EIAG Board. Any comments in this paper reflect the views of the
authors and are not intended for broader consumption or circulation. In the event that a
person or persons outside the circulation group specified read the document it is on the
understanding that the information contained herein is confidential. Any comments which
may appear to be disparaging regarding a third or other parties should be read in context
and are stated on a without prejudice basis. The authors take no responsibility and will be
deemed to be indemnified from any legal action or claim as a consequence of the issues
detailed in this discussion paper.
Dr. Rovel Shackleford
Dr. Michelle Pizer
Title Release Date
ETTA Options Paper Draft 1 4/11/2004
ETTA Options Paper Draft 2 8/11/2004
ABC Activity Based Costing
ASIAL Australian Security Industry Association Ltd
CBL Competency Based Learning
CBD Central Business District
CGIT Central Gippsland Institute of TAFE
CSD Commercial Services Division
EIAG Energy Industry Advisory Group
EIEF Energy Industry Education Foundation
ETTA Energy Telecommunications Training Australia
FFS Fee For Service
HV High Voltage
IP Intellectual Property
K Thousand ($)
LV Low Voltage
M Million ($)
NMTC National Mining Training Centre
NSW New South Wales
NT Northern Territory
OH&E Occupational Health & Environment
OTTE Office of Technical & Tertiary Education
PAWA Power and Water Authority
PPP Public Private Partnership
SA South Australia
SEC State Electricity Commission
UNSW University of New South Wales
WA Western Australia
Note - All currency is in Australian Dollars.
Table of Contents
1 Introduction 3
1.1 Project Objectives 3
1.2 Development Process 4
1.3 Business Description 5
1.4 Physical Facilities 17
1.5 Intellectual Property 19
1.6 The Value of the Business 19
1.7 Major Issues to Overcome 25
1.8 Stakeholders Defined 26
1.9 The Options Matrix 28
1.10 Recommendations 33
1 Int rod u ct ion
1. 1 P ro je ct O b j ect i ves
Arrina Strategic Planning and Economics, has been commissioned by the Energy Industry
Advisory Group Inc (EIAG) and the Energy Industry Education Foundation (EIEF) to help
produce an Options Paper that addresses the options associated with the potential
acquisition of the training facility known as Energy Telecommunications Training Australia
The objectives stated by the EIAG Board were as follows:
The Options Paper should aim to identify the opportunities and implications, areas of growth
and decline, and business development and operational activities, and then evaluate and
assess the implications associated with the potential acquisition of ETTA. All considerations
need to be framed within the context of investment and risk to investors. The underpinning
considerations for acquisition include:
• The future viability of ETTA as a commercial venture.
• Future growth of utilities based training delivery.
• Potential to develop a culture that can work with flexible training delivery modes.
• The potential to leverage non-asset based solutions.
• Maximise utilisation of existing facilities at ETTA.
Rationalise the potential hurdles and risks associated with the acquisition of ETTA.
Since disaggregation of the energy industry over 10 years ago there has been a constant
and continual fracturing of the industry and its ancillary service and service providers such
as training. The EIAG has emerged from Skilling for The Future (SFF) as a forum focused
on dealing with the energy training/skilling debate in the most pragmatic way. There are few
common threads that draw the ‘industry’ together in any meaningful way; there are lots of
forums; lots of seminars; lots of discussion papers unfortunately there appears to be little
action beyond good intent.
This may be the final chapter in the disaggregation of an industry, its demise underpinned by
inaction and a litany of failed attempts to reignite the passion of an industry to be the best at
what it does; to develop a robust and dynamic well qualified workforce from the
tradesperson through to the paraprofessional to the professional and in so doing protect
industry and domestic consumers by providing a reliable and robust energy safe future for
This discussion paper will hopefully ignite the passion of the industry and provide a catalyst
for change by drawing together a group of likeminded industry organizations to fund and
support the ongoing provision of timely, relevant and cost effective training to Australia’s
1. 2 De ve lo p ment P ro c ess
It was also agreed that the ETTA Options Paper needed to be robust and credible.
Therefore, the development process included substantial consultation across the wide range
of energy industry stakeholders, as well as numerous in depth interviews to verify issues and
Given the complexity of the energy/utilities industry the research was required to identify and
address the key issues that emerged throughout the development process, three streams of
investigation were conducted by the respective discussion paper authors as defined in
Figure 1 – The Options Evaluation Process
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As shown in Figure 1.1, a number of written outputs will inform the deliberations of the EIAG
and EIEF Boards and members. These included:
• An Options Paper (released 4/11/2004) documenting the options available to
secure one of Australia’s best recognized energy training facilities, with a view to
creating an energy industry owned and managed enterprise that is responsive to the
industry’s skill development/delivery needs,
• A Business Case (to be released in the first week of December 2004) providing a
realistic forecasted position for the option that the EIAG chooses to adopt. The
business model must protect the ETTA investors and deliver an appropriate and
responsive portfolio of training/skill development services to Australia’s energy
• A Prospectus (to be released mid December 2004) the prospectus will be the
instrument used to attract potential investors to invest in ETTA as a viable business
proposition which provides the dual edged benefits of a healthy return on investment
and the delivery of timely skills training services to Australia’s energy industry.
This Options Paper reflects the recommended options available to the Board’s of the EIAG &
the EIEF as researched by the consulting team.
Given this development process, it is impossible for this Options Paper to capture the entire
range of permutations and variations of options available however the fundamental options
have been selected with the understanding that any variation will need to be evaluated
within its own context against the predetermined success criteria as outlined within this
paper. The process adopted has negated the risk of significant repetition; as a result, this
Options Paper focuses on the consideration of a range of pivotal options.
1. 3 Bus in e ss D esc rip t i on
ETTA is the commercial, Fee for Service (FFS) division of Central Gippsland Institute of
TAFE (CGIT). ETTA is not an RTO, it trades under the RTO status of CGIT.
Between 1945 and 1994 the training facility formerly referred to as the, “Line-School” belong
to the Victorian State Government’s State Electricity Commission (SEC).
In 1994 the State Government of Victoria sold the SEC Line-School as part of the
desegregation of the power industry.
In 1996/7 CGIT acquired and annexed to ETTA the Gas Training Team from the Hyatt Gas
& Fuel Training Centre closely followed by the Telecom Training Team from Telecom’s
Training Centre at Doncaster. Within a time frame of less than five years the training
disciplines for electricity (generation and distribution), water, gas and telecommunications
were consolidated on one site now known as ETTA. The aggregation of the various training
disciplines now broadly described as the utilities sector caused untold consternation and
cultural upheaval with the training teams at ETTA. Table 2 denotes ETTA’s indicative
portfolio of training as it stands today.
Activity $ Contribution % Activity
Lineworker Apprenticeship $1.6M 33%
Telecommunications $620K 15%
Gas Distribution $480K 10%
Type B Gas $360K 8%
HV Operations $300K 7%
OH&E $280K 5%
Short Courses $300K 5%
Generation $200K 4%
Security Risk Management $180K 4%
Consulting $180K 4%
Live-line Refresher $120K 3%
Leadership $98K 2%
The projected fee for service revenue for ETTA, the Commercial Services Division (CSD) of
CGIT amounts to $4.682M a proposed $1.24M increase on revenue targets projected in
2003. The Commercial Services Division activity is subjected to the prevailing whims of the
markets that ETTA serves and as such it would be less than responsible to admit that the
proposed income target represents a medium to high risk.
Anticipated National Economic Impacts
Interest rates are expected to continue to rise in 2004/05 levelling off at approximately
6.25%. This will have the impact of slowing the economy and in turn cooling business
activity. Other anticipated impacts include labour shortages which are expected to increase
personal incomes thus placing further pressure on the discretionary training expenditure
budgets of industry. The compounded factors of increased interest rates and wages may
have a dampening impact on investment in training. However increased skills shortages in
the utilities sector have the potential to escalate demand for quality flexible training/skill
development significantly over the ensuing 8-10 years.
Over the past eight years the Human Resources departments in most industries in Australia
have become strategically impotent and as such their capacity to influence training budgets
has diminished in most cases by upwards of 50-80%. This situation is changing as labour
forces become more dynamic and the shortage of technical labour in Australia starts to
erode the competitive capability of many industries. CEO’s are now placing this matter on
the agendas of economic forums around the country. The Federal Government is also
working on the skills shortage issue; this was a significant policy platform for industry during
the recent Federal Election (October 2004).
Fortunately ETTA provides training into industries which are compliance heavy thus
providing the ETTA team with the opportunity to be innovative in attempting the following:
Reserve Bank Forecasts 2004
Details in ETTA Strategy released in December 2003
Recapturing market share lost to competitors conservatively estimated to be $2.5M
Grow the business geographically into national markets such as WA, Northern
Territory, NSW and Queensland which have been under serviced in the utilities
Subject to the strength of the AU$ pursue regional markets particularly the more
lucrative markets of telecommunications and energy in the Asia Pacific Rim.
Driving the training agenda of industries as a cluster rather than working only on a
client by client basis; in other words becoming more strategic and vertical by
providing training/skill development at three levels:
o Technical – trades
Risk Mitigation Strategies for ETTA Business:
Effective utilisation of training personnel through flexible contracting arrangement,
multi skilling and multi-tasking, targeted delivery utilization from current 68% to 80%
Representation on strategically focused national industry committees/forums,
Development and packaging of new products and services with a concerted focus
on growing the higher value business opportunities such as consulting services and
Continued reshaping of the way ETTA does its business from static to dynamic
Expansion of market share into national markets through strategic alliances,
agencies and franchises,
Capture of Victorian market share from existing competitors,
Increase charge-out rates/fees to a realistic and sustainable level.
Telecommunications (incorporating Sydney and Adelaide operations) – Target
Revenue $0.637M (Table 3)
The demand for telecommunications training is slowly returning after the roller coaster ride
from 1999 through to 2003. ETTA has been successful in gaining preferred provider status
with Telstra in its own right as previous arrangements through partnerships with other TAFEs
eroded ETTA’s relationships and subsequently its income stream from Telstra training. The
Security training business has grown significantly in 2003 and it is anticipated that the rate of
growth will continue in 2004.
The telecommunications team recently secured a national training program with Skilled to
deliver 300 Traineeships to Telstra over the next thee years; the contract is valued at $3M.
The telecommunications team are expected to move solidly into the training market in the
Asia Pacific region on the back of their recent success in Tonga. The key issue to achieving
this business will be their ability to be responsive.
Specialised courses such as RF Radiation Manhole Rescue and Dangerous Gases will
ensure that the Telecommunications section becomes a preferred supplier within Industry in
Qld, Vic, NSW and SA.
Area of Training Risk Assessment Comment
Power Awareness Low Power Awareness refresher
courses are an annual
requirement which is
mandatory for all staff
working on electrical assets
and will be consistent in NSW
Security Short Low Associations with ASIAL and
courses Direct Alarm Supplies will
allow ETTA to penetrate the
new security market, along
with renewed advertising.
ETTA has applied for a
Master licence in NSW.
Upon registration ETTA can
accredit their instructors to
deliver Security courses in
Green Card Courses Low All construction workers
require Green Card
Accreditation to continue to
work on any building site in
NSW. The Sydney Instructor
will be able to deliver this
course upon receipt of his
Adelaide category 4 OH&S certification
Cat 5 Medium In SA traditional TAFE
Coaxial Cable colleges do not possess the
Optical Fibre skills required to deliver these
courses. ETTA’s reputation
in training of
ETTA the ideal training
provider. We will up skill the
SA instructor to take on this
ETTA is the preferred
Exchange Entry Medium supplier of exchange entry
courses for TELSTRA in SA
An effort to package various
Cabling licensing Medium licences has proven effective
and we are already filling
classes for 2004. ETTA’s
facilities, equipment and
hands on course program
give ETTA an edge over
traditional TAFE providers
ETTA currently has trainee’s
Refresher courses Medium in the Certificate III in
Security Access and has the
potential to increase this
number due to our advantage
over other TAFE Institutes
with our excellent practical
Refresher courses provide
Security Traineeships Low ongoing revenue as we
attract back clients after
completing their ‘initial’
courses a year ago. We are
recognised by industry as
OH&S related courses in
these areas and with the
focus on risk management
and credibility of training
providers we envisage the
trend will continue.
ETTA has the ability to
Telecommunications Medium deliver Security and Satellite
Courses short courses in 2004
Telstra Mechanical Aids
Telstra Courses Medium training is on the increase
Mechanical Aids and reports are that ETTA is
the preferred supplier for this
training in 2004
ETTA has been named by
Exchange Entry Medium Telstra as the supplier for
training of Exchange Entry in
Victoria for all contract staff
Lineworker Revenue $1.6M (Table 4)
This area continues to perform well and is expected to achieve a better overall result in
2004/05 due to an increasing demand for competency assessments for qualified line worker
tradespersons against the national training packages. The continued shortage of qualified
trainers has been addressed through the recruitment of contractors who will be hired on an
Area of Training Risk Assessment Comment
Line worker Low Continued demand for this
area of training will be even
greater in 2004.
Interstate Medium ETTA is still the ‘User Choice’
apprentices RTO for Lineworker
apprentices for the Northern
Territory. ETTA’s sound
relationship with the NT Govt
has gained it training
opportunities in the power,
gas and telecommunications
Apprentices High ETTA is the only provider of
training in Victoria of this
apprenticeship. It is a high
cost area to deliver, due to
OH&S requirements and
consumables but industry has
been leveraged for and
funding from government
ensures this course continues
to be viable.
Power Generation Medium ETTA continues to provide
training and consulting
services to the generation
industry around Australia.
The primary factors holding
ETTA back in recent years
has been a tendency to
undercharge for this type of
OH&S Medium This is a highly competitive
area however it is provided to
service the ongoing needs of
ETTA’s clients. This portfolio
is expected to grow
significantly in 2004. The
team supporting this activity
at ETTA has been reshaped
to grow this business
opportunity through product
and service differentiation.
High Voltage Medium-High Repeated support from major
Operations clients due to good reputation
for training. New areas to
pursue in 2004 are interstate
mines and other high energy
users. Steady area with
reliable income. Appropriate
charge out rates will ensure
the ongoing viability of this
Gas: Target Revenue $0.729M (Table 5)
There has been high demand for traineeships in Gas Operations in 2003 and this will
continue in 2004. The move to Ardeer is a key to ETTA’s success with Abigroup. ETTA
continues to be the primary provider of their training at this stage. Over 80% of ETTA’s gas
training has been delivered at Ardeer and an improvement across the board is anticipated
once the review of the national competency standards is completed in 2004. Enquiries from
interstate are increasing steadily. The gas team was restructured in July 2004 to become
more responsive and flexible to meet the ebb and flow of industry demand.
Area of Training Risk Assessment Comment
Gas Operations Low ETTA has extensive
enrolments from several
major gas construction
interest from QLD, NSW and
Tasmania is gaining
momentum and points to a
busy year ahead for this area.
Type ‘B’ Low A shortage of qualified
trainers in this area stifles
ETTA’s ability to expand this
niche market. ETTA is
delivering on behalf of
Tasmania TAFE and at this
stage, ETTA is still the only
provider of this qualification in
Victoria as agreed by the
Office of Gas Safety in 2003.
This portfolio is currently
Gas Pressure Control Low under review.
Short Courses Revenue - $0.479M
The short course market within the sectors currently serviced by ETTA has never been truly
exploited; currently the utilities sectors in Victoria alone spend $2.8M on short course
training products such as:
Specialist technical training
Similarly there are also opportunities to deliver high value one-off workshops and seminars:
typically these types of functions generate $20K-$50K per event.
The short course team will investigate and attempt to exploit the potentially significant range
of publishing opportunities that reside within both the utilities and generation sectors; these
Specialised handbooks and manuals
Energy Industry Training Statistics ABS 2001
Technical book sales
The risk is anticipated to be medium to high as this portfolio is new and untested.
Workforce & Leadership Development: Target Revenue - $0.270M
Formerly known as the Big W project, this project has evolved and matured into a product
that has been adopted by wider industry. New target markets have been defined and are
currently being exploited, particularly the traditional markets serviced by ETTA, This portfolio
is medium risk due to the fact that the marketing opportunity has crystallized during 2003
providing a promising outlook for 2004.
ETTA Current Ratios:
The current ratio is forecast to increase by $0.03 to $1.21: $1.00.
The return on assets for 2004 is -7.93%.
The return on equity for 2004 is -2.88%
Table 6 provides an insight into ETTA’s projected performance as at end December 2004;
this target has been severely downgraded since the dismissal of ETTA’s General Manager
in September 2004. Many initiatives have been terminated by CGIT.
ETTA Budgeted Performance 2004
Forecast at end December 2004
RECURRENT OPERATIONS - REVENUE
Govt. Student Fees & Charges 92,000
Common. Govt. Grants
Govt Fee for Service
State Government Current 688,275
State Govt. Other
Sale of Non Current Assets
Income from Facilities 8,000
Other Revenue 17,840
TOTAL REVENUE 4,487,632
RECURRENT OPERATIONS - EXPENSES
Salaries including Oncosts 2,766,180
Direct Teaching Expenses 125,000
Travel Expenses 200,100
Motor Vehicle Expenses 197,000
TOTAL EXPENSES 3,692,848
FUNDED OPERATING SURPLUS / - DEFICIT 794,784
BUDGETED OPERATING RESULT 526,164
NET RESULT SURPLUS / - DEFICIT
Table 7 provides an insight into the projected portfolio performance of ETTA for the calendar
year January to December 2004.
ETTA Business Activity Centres Unit
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*Note the negative sign denotes a surplus
Current Position (October 2004)
CGIT is currently engaged in a process of contraction of ETTA’s training and consulting
activity and is currently in a mode of winding back of national initiatives. Essentially the
strategy is to deconstruct ETTA so that by end December 2004 ETTA will fundamentally
only have an asset value equivalent to that of the 7.5 acres upon which the business
currently trades. The reason why this approach is being taken is that it will be easier for
CGIT and OTTE to seek divestment of real estate than a business. Neither entity; CGIT nor
OTTE truly values what ETTA can deliver nor its strategic value to the energy industry. This
coupled with a current round of EBA negotiations with the teaching staff at ETTA and a
significant reduction in revenue is likely to drive ETTA’s financial performance into negative
territory by end October/November 2004.
The $3M Telstra contract will be abandoned by ETTA in November 2004; and existing
partnerships with providers such as BEC Engineering in WA, CBL in Qld and Charles
Darwin University in the Northern Territory and NMTC have been reversed thereby reducing
the opportunity to build and capitalise on strategic training opportunities around the country.
Figure 2 provides a fundamental outline of the organizational structure of ETTA as it exists
today. The future structure will be determined by the range of portfolios acquired and
retained business activity of ETTA following CGIT’s progressive deconstruction of ETTA’s
ETTA Structure 2004
ETTA Operations Manager
Finance & Expenditure Management ETTA Market Development Manager
Human Resources International
Administration Services Tendering
Program Leader Telecommunications Public Relations
Program Leader Electrical Distribution Commercial Development
Program Leader HV Operations Business Planning
Program Leader Electrical Operations
Program Leader Gas Operations
Program Leader Gas Appliances
Program Leader Telecommunications
Program Leader Workforce & Leadership Development
Program Leader Short Courses
Program Leader Infrastructure Risk Management
Program Leader Generation
Program Leader Consulting Services
Program Leader OH&E
Program Leader Water
1. 4 Ph ys i cal Fa ci li t i es
The facility known as ETTA occupies 7.5 acres of land 20 minutes from Melbourne’s Central
Business District (CBD) in the South Eastern suburb of Chadstone.
The ETTA facilities comprise outdoor training areas for the Lineworker training, HV/LV
operations, gas and telecommunications, several classrooms, maintenance sheds and
administration buildings. The facilities are purpose built and in most instances replicate to
within 88% accuracy the assets that exist in the street. The unique feature of the ETTA
facility is that trainees and apprentices can work in a safe environment that replicates the
assets they will be working on when they complete their training.
The first building was constructed in 1945 followed by extensive construction in the 1970’s
followed by a yard upgrade in 1990/91. The facility is in a poor state of repair and requiring
an estimated $2M to render the training facility safe and functional. CGIT diverted $5M
capital upgrade from ETTA to Leongatha Campus about two years ago (2002). The
Institute’s attitude to the ETTA facility has always been less than enthusiastic. All of ETTA’s
administrators (4 in 10 years) have been openly and consistently castigated by the Institute
for failing to improve the financial performance of ETTA. ETTA until 2003 was not a viable
business and it was blamed for placing ongoing financial stress on the Institute.
The land is currently zoned by the City of Monash as residential; this zoning will need to be
changed to a zone category for educational purposes, if the site is to be used as a training
facility in the future.
The City of Monash has also requested that a Master Plan be prepared for the site when
rezoning is requested; the indicative budget for this activity is anticipated to be $80K.
ETTA Training Facility Chadstone Victoria
1. 5 Int ell e ctu al P ro p er t y
Since 1994 ETTA’s instructor workforce has been diminishing at the rate of 5% per annum
until April 2003 when the business was totally revamped and 18% of the workforce was
retrenched. The positive change that occurred at this time was the introduction of a largely
contracted workforce providing the capacity to tailor training response to demand thus
creating a more demand driven workforce. Other initiatives included bottom up budgeting
and a refinement of cost centre management relative to portfolios thereby creating a
capacity to implement activity based costing (ABC) for the first time in any training institution
in Australia. New management and financial management principles introduced in 2003
coupled with a workforce restructure; promotion of the ETTA brand and diversification of the
services delivery portfolio resulted in ETTA achieving its first profitable performance in ten
Training provided by ETTA currently meets the technical skills needs of approximately 50-
70% of the Lineworker trades; high Voltage (HV), generation and ancillary services training,
such as traffic management, Red Card, vegetation clearing and occupational health and
Since the termination of the ETTA Curriculum Development Team in 1998 there has not
been any significant intellectual property development. Most of the training materials in gas
and some streams of LV and HV still carry the logos of the former Gas & Fuel and SEC.
About 40% of the curriculum content is stale and training methods still reflect practices
developed in the 1960/70’s. Whilst existing trainers are qualified to conduct training; many
have not been on the tools for upwards of ten years.
The challenge now is that due to existing skills shortages in the utilities sector many trainers
are being lured back to industry with the promise of better pay and conditions. The average
age of the ETTA Instructor team is 58 years of age. Younger people are not inclined to join
the training team at ETTA; trainers are paid less than 50% of the income enjoyed by their
counterparts in industry.
Intellectual property upgrades and methodology improvement will require an initial
investment of approximately $300K.
1. 6 Th e V alu e of t h e Bu si n e ss
Several methods were investigated to determine the value of ETTA as a business, such as:
Asset Valuations: Calculates the value of all of the assets of a business and
arrives at the appropriate price.
Liquidation Value: Determines that value of the company’s assets if it were forced
to sell all of them in a short period of time (usually less than 12 months).
Income Capitalization: Future income is calculated based upon historical data and
a variety of assumptions.
Income Multiple: The net income (profit/owner' benefit/seller' cash flow) of a
business is subject to a certain multiple to arrive at a selling price.
Rules Of Thumb: The selling price of other “like” businesses is used as a multiple
of cash flow or a percentage of revenue.
Table 8 attempts to provide a valuation of the business on an asset valuation basis over
the core portfolio elements of ETTA’s business. The elements have then been weighted by
potential stakeholder interest and a notional value has been placed against the component
element at an indicative replacement value. The value has been mapped against potential
stakeholder interest and income as a degree of analytical dissection is critical when
considering the divestment/acquisition options.
Table 9 delineates by portfolio potential stakeholder interest in ETTA incorporating investor
and service participation considerations.
Figure 3 & 4 chart the sectors that the EIAG can expect potential ETTA investors to come
from and where the business can expect to derive its future income. Clearly several sectors
seem weak; telecommunications, gas operations and gas appliance industry groups need to
be encouraged to take a deeper interest in skills development and training. It appears that
the strongest support for training and potential investment in ETTA in the short to medium
term will be derived from the electrical energy sector in:
This collection of tables and figures should provide a clear picture for the EIAG as to which
particular portfolios it may wish to target in its consideration for investment. It may be wise
to strip out the portfolios of most relevance to the EIAG and build them into a strong
business rather than focusing on the entire utilities sector.
The authors are of the opinion that the EIAG should consider the widest range of possible
options from the selective acquisition of ETTA portfolios through to the purchase of ETTA as
it stands today.
Activity Asset Value IP Value People P/A Government Activity Value EIAG Relevance
$000,000 $000,000 $000,000 Funded. % % $000,000 L-M-H
Telecommunications .5 .25 .3 8 16 .7 L-M
Gas Operations .5 .25 .3 3 15 .7 H
Gas Appliances .1 .2 .1 X 9 .4 H
Electrical Operations .8 .3 .2 X 14 .7 H
Electrical Distribution 2 .3 .5 80 23 1 H
Other .1 .1 .1 X 2 .5 M
Workforce Leadership X .1 .1 20 10 .2 M
Short Courses .2 .15 .15 X 11 .5 M
Total 4.2 1.55 1.75 18 4.7
Asset Value - denotes the value of the assets used to deliver this type of training at full replacement cost.
IP Value - denotes the value of the IP to purchase or rebuild.
People – this is the indicative lowest possible labour cost associated with running the portfolio at the trainer level.
Government Funding – this is the amount of training income either directly or indirectly funded by State & Federal Governments.
Activity – denotes the portfolio relative to activity of whole of budgeted income.
Value – portfolio income per annum.
EIAG Relevance – indicates the potential level of interest in a training portfolio matched to the current needs of the EIAG membership.
ETTA Training Portfolios
Participation in ETTA
1 Vic Government L H L M H L L M L-M
2 Federal Government H H L H H M M M L-M
3 Internal Support CGIT L L L L L L L L L
4 Personnel Support/Commitment M M M H H M L M M-H
5 Industry (Broad Context) H H M H H M M M M-H
6 Other RTO’s L L L M M L L L L
7 Generation L M M M M L L M L
8 Transmission L L L M M L L L L
9 Distribution L L L H H M M M H
10 Traction L L L M M L L M M-H
11 Regulators L H H H H M M M H
12 Unions L L L H H L M L H
13 Telecommunications L L L L L L L L L
14 Gas L H L L L M M M M-H
15 Other Utilities L L L L L L M M L-M
L=Low; M=Medium; H=High
Figure 3 - Relational Interest/Commitment Chart
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Figure 4 - Probable Investor Mix
2 ! " !#
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/0 / "(
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1. 7 Ma jo r I ss ue s t o O ve r co me
There are many issues to consider at this time; the EIAG is in the position where it will be
judged by the decisions made regarding the acquisition or otherwise of ETTA. The issues
facing the industry are multilayered and multidimensional; the word that is commonly used is
“dynamic”. This is simply untrue; the Australian energy industry is in a state of flux and
constant change, in such an environment the development and implementation of strategic
training and skill development initiatives at a national or local level is almost impossible and
fraught with risk.
The challenges and complexities facing the industry are further compounded by changes in
Federal policy in regard to education. The primary funding conduit for TAFE is being
dismantled and a parallel tertiary technical college network is being established.
The only way that a sustainable and robust training agenda can be developed and
implemented in this country is through collaboration. The energy industry has a unique
opportunity to use the entire or partial acquisition of ETTA as a catalyst to rally the industry
around the development of a national skills strategy for the industry; this initiative can be
driven through the establishment of a skills centre of excellence to the energy industry.
ETTA as a business has tremendous potential; initiatives developed over the past 15
months can deliver the following returns to ETTA:
Initiative Value $000,000 Timeline
Gas Turbine Users Group .4 July 2005
New Training Options .6 April 2005
Hybrid .2 April 2005
PAWA Tender 3.2 March 2005
PAWA Risk Management .1 January 2005
NMTC .2 Ongoing
Transalata Training Yard 1.2 July 2005
CBL .3 Ongoing
Telstra Traineeships 3.4 3.2 current
Telstra Tower Project .3 March 2005
Tonga training .1 Ongoing
Malaysia .4 August 2005
TXU Online Induction .1 Current
GASA Secretariat .2 July 2005
Techcom Simulation .2 March 2005
EDL .5 August 2005
All the initiatives in Table 10 have been reversed due to the fact that the Institute (CGIT)
appears to be devoid of qualified and experienced managers who are capable to manage
1. 8 St ak eh o ld e rs D ef in ed
Table 10 details the key stakeholders in the potential ETTA acquisition/divestment process. Apart from the EIAG there are two other entities
interested in the future of ETTA for varied reasons and then there are the existing stakeholder/owners and managers of ETTA.
When considering the options it is important to view the opportunities from a range of perspectives. The convergent or divergent perspectives of
other stakeholders either internal or external to the divestment of ETTA may have a positive or detrimental impact on the EIAG’s plans to acquire
ETTA either in its totality or in its portfolio components.
Stakeholder Likely Agenda Likely Response EIAG Response
Department of OTTE wants to sell off the land, it needs OTTE will make some veiled attempt at showing The best way to mitigate this response from
Education. the funds; with an estimated market value an interest in ETTA, however its response is clear; OTTE is to seek the support of the Minster for
(OTTE) of $12M the ETTA campus at Chadstone sell the land and claw back the funds it outlaid on Energy & Resources to either block OTTE’s
has more value to OTTE in the bank. ETTA several years ago. OTTE will filter its disposal of the asset or alternatively transfer the
The Minister of Education will be keen to decision making process on ETTA through CGIT. asset to a more empathetic Ministerial portfolio
recover $4M that her department paid for CGIT will be the scapegoat for OTTE; the trade off such as Energy & Resources. The EIAG
the Chadstone site nearly 3 years ago. will be that CGIT will get 50K hours from OTTE to response will also be dependent on which option
fund training in the Valley. An inevitability has it decides to pursue.
been orchestrated which will result in the demise
of ETTA as a viable training business by
December 24, 2004.
Stakeholder Likely Agenda Likely Response EIAG Response
CGIT Divestment of ETTA. This has been an CGIT has already started to deconstruct ETTA; The EIAG may need to act reasonably quickly if
agenda pursued by some senior managers at initiatives launched in the past 15 months have it hopes to salvage any of the ETTA business
CGIT for several years. The logic of CGIT been reversed and asset maintenance activities. Alternatively the EIAG can wait for a
commercial decision making defies gravity as schedules have ceased. The current executive fire sale and pick the components of interest up
an Institute it has never been credited with of CGIT appears to be neither competent nor at a discount. The issue may be that in the
making a sensible commercial decision. The confident enough to deal with industry. The next eight to twelve weeks ETTA’s best training
disposal of a division known as SMART Driver preferred course of action is to run ETTA into the personnel will depart for industry positions. The
training in 2003 is the most recent case in ground and thereby assist OTTE to achieve its paper authors have been informed that at least
point. Since the fire sale divestment of objective to sell off the land. CGIT and OTTE 12 key ETTA personnel are actively seeking
SMART to DECCA the business has gone will work with each other in such a manner that outside positions.
from strength to strength SMART recently one will blame the other for the demise of ETTA
engaged 5 new staff and purchased 2 knew and then divide the residual spoils of ETTA’s
trucks to cope with demand for driver training. inevitable demise.
Powercor Has a definite interest in the demise of ETTA. Powercor will applaud the closure of ETTA The EIAG needs to consider whether it will
In recent years Powercor has set up its own because this will force industry to train through establish a rival training facility to Powercor
training facilities around Melbourne and is their facilities in Melbourne and South Australia. (ETTA Mark 2) or join the Powercor national
currently applying for RTO status. ETTA has Powercor has already contacted OTTE training initiative currently linked across three
been a thorn in Powercor’s plans in recent supporting the closure of ETTA suggesting that it states of Australia:
months. Powercor clearly has a national has not met industry needs for many years. Warren Centre UNSW in NSW
training plan centred at ETSA in South Powercor is perusing the opportunities that may ETSA in South Australia
Australia. emerge from the new Federal Government’s Training facilities in Victoria.
initiatives on education. The establishment of
specialist technical colleges.
ETU The ETU has made some overtures over past The ETU may be considering its options. The The EIAG and the ETU should consider
months regarding the acquisition of ETTA as ETU will be thinking about how it positions itself working in collaboration to secure a training and
a full asset purchase; in other words in the light of the changing political landscape in skills development future for the energy
purchasing ETTA as it stands today. Australia. All unions will be redefining their roles industry.
and assessing how they will remain viable.
1. 9 Th e O p t io n s M at ri x
The Options Matrix identifies the options for acquiring ETTA at four distinct levels:
First Order Consideration – these options are low risk to the investor however
these options may be the most difficult to initiate due to the fact that the primary
stakeholder OTTE is seeking a quick and viable cash result; a complete sell off of
ETTA as detailed in Option 7 would undeniably suit OTTE. These options may also
be complex in the negotiation and acquisition phase. A simple walk in walk out
arrangement will certainly be expeditious however this is also high risk as defined in
the Fourth Order Considerations.
Second Order Consideration – these options are of moderate risk; however are
also complex in so far as some of the detail and multiple relationships will need to
be established to achieve the desired outcomes.
Third Order Consideration – these options are high risk for the investor but lower
risk to the vendor; in this instance OTTE and CGIT.
Fourth Order Consideration – these options are high risk to the investor however
low risk to the vendor. These options would certainly be very quick to implement
however the return on investment considering the level of capital investment may
not be realised for at least 10-15 years if at all.
The authors of this paper firmly believe that the funds should be committed to building a
robust product and service delivery model which is and should be the core business of
ETTA; investment in real-estate is not the core business of ETTA. There is the potential to
attract two types of investor to this opportunity; the ETTA business investor and the property
investor. The only overriding issue when considering this investor mix is that the utilization
of the land that ETTA currently occupies at Chadstone would not provide the level of return
that a property investor would be seeking.
The true intrinsic value in the business known as ETTA is as follows:
Intellectual Property (IP) – learning resources and materials,
The People – a unique group of individuals generally respected by industry with the
capability and passion to training to the energy sector.
The Database – a comprehensive list of clients developed over 10 years,
Brand – ETTA is a brand that is widely recognized by the energy industry.
The land; pole yard, transformer yards, outbuildings and classrooms can be easily replicated
at a number of locations through the utilization of existing asset and or the use of
modularized training facilities.
There may be a range of other options which will be permutations and variations of the
options defined however these options are believed to reflect the core/fundamental options
available to the EIAG.
Table 12 The Options Matrix
First order consideration
Second order consideration
Third order consideration
Fourth order consideration
Cost Elements $000,000
No. Option Description Land Buildings IP People Total Risk Impact
Yard/Tools Brand Cost
This option is like a PPP; OTTE will retain
1 Take over the management rights of X X X .4 .4 L-M the asset, the business will be transferred to
ETTA; on a profit/cost or a no profit/no a business management group such as the
cost share arrangement. With OTTE. EIEF. The EIEF will carry/share the costs
and profits with OTTE. It is unlikely that
OTTE will be interested in maintaining a
ongoing liability/commitment to ETTA.
OTTE’s preferred position will be that the
business managers take all the risk.
OTTE’s primary objective will be to sell the
land that ETTA currently occupies and grab
the cash. It is unlikely that OTTE will
confirm this strategy however it has been
the central discussion with CGIT in recent
weeks. The trade off for CGIT is that it will
receive about 50K hours additional training
a year this adds about $500K to CGIT’s
Cost Elements $000,000
No. Option Description Land Buildings IP People Total Risk Impact
Yard/Tools Brand Cost
Significant capital will be tied up in assets
3 Purchase the IP and ETTA 4 3 2.2 X 9.2 M-H which at best will only experience 75%
brand/database and establish the utilization. The expectation that
training facility in another location. apprenticeships will continue in the existing
format may be tested in ensuing years. It is
highly likely that two year traineeships will
supersede the current apprenticeship
programs this may reduce the asset
requirement for training.
The risk is that OTTE will seek a
2 Purchase of the business of ETTA and X X 2.2 .4 2.6 M- commercial lease arrangement possibly in
lease the land and buildings from the range of $300K - $400K per annum.
OTTE. OTTE does need the revenue. It is unlikely
that the business can sustain this overhead.
OTTE may forgo the lease income however
a trade-off will need to be negotiated; such
as apprenticeships funding offset by the
ETTA business management team.
This option basically substitutes one
4 Take over the management rights to X X 2.2 .4 2.6 L-M business manager with another; in this case
ETTA. CGIT will be replaced by the EIEF. This is
a low risk option as all risks are shared.
OTTE will have some direct input into the
business operations, however it is
envisaged that overall direction setting will
be driven by the industry.
Cost Elements $000,000
No. Option Description Land Buildings IP People Total Risk Impact
Yard/Tools Brand Cost
Additional investment will be required to
5 Establish a new parallel business 4 3 1.8 .6 9.4 M-H build a new brand. Similar asset investment
competing with ETTA. issues as options 3 & 7.
Establish a symbiotic partnership with a
6 Purchase the IP and ETTA X 2 2.2 .4 4.6 M-H TAFE or RTO which will be compatible,
brand/database and establish the empathic and is prepared to work
training facility in another training collaboratively with industry. The risk is that
institute (TAFE) or private RTO. the partnership could deteriorate to the level
of the existing relationship with CGIT. The
issue is that there is no real control over
how RTO’s manage their priorities. The
consequence of this is that there may not
be any sustained level of certainty for the
7 Over 90% of the capital will be tied up in
Purchase the entire business known 12 4.2 2.2 .4 18.8 H land and buildings; unless it can be clearly
as ETTA. The outright acquisition of demonstrated that the existing location at
ETTA including all assets; databases; Chadstone is extremely strategic it seems
forward contracts and liabilities. folly to invest in this manner. In the event
that the business fails only 61% of the
capital investment will be recovered. It is
unlikely that the EBIT can justify the level of
investment that this option requires.
Cost Elements $000,000
No. Option Description Land Buildings IP People Total Risk Impact
Yard/Tools Brand Cost
This option will result in the ultimate demise
8 Status quo X X X X COST OF M-H of training to the energy sector in any
TRAINING cohesive way. Training will become
fragmented as a consequence of only the
profitable and well supported components
being picked up by other RTO’s. CGIT has
clearly demonstrated that it has no vision for
ETTA as the one-stop-shop energy industry
centre of excellence. The training gap is
likely to be filled by the likes of Powercor.
This option will produce a parallel result to
9 Break ETTA up; move the sub- X X X X COST OF M-H Option 8. Energy industry training will
elements of telecommunications, Type TRAINING become fragmented and potentially more
B Gas, sort courses, electrical and complex and costly for end-users.
leadership training into other RTO’s
1. 10 Reco m men d at i on s
When considering how to move forward with the potential acquisition of ETTA it is worth
pausing and thinking about what it is that the EIAG is attempting to achieve.
There are two fundamental questions to be asked initially:
1. Does the EIAG want to invest in an entity which it can call a centre of excellence in
energy industry training; an iconic landmark that has deep historical relevance to the
industry in Victoria? Or,
2. Does the EIAG want to invest in new training methods and technology in a new
setting which may be more dynamic with a workforce that is flexible and committed,
thereby building a new ETTA?
There are four critical elements to a successful training business:
Intellectual property – as stale as some of ETTA’s IP might be it has a value and
there is a solid core of IP that can be built on given the right amount of resources.
People – the ETTA team in the main are high net-worth individuals, in an industry
that is rapidly running out of talent; the team is worth retaining.
Database – ETTA has the most comprehensive industry training database in the
country. ETTA’s address and telephone numbers are extremely valuable as is its
web address www.etta-traing.com .
Brand – ETTA’s brand is well known in the industry and respected in most quarters;
this is not to suggest that there is no room for improvement. The ETTA brand is
recognized by 90% of the energy industry in Victoria and close to 78% of the energy
industry in Australia.
The recommendation is that the EIAG considers what it wants to achieve as an industry
advisory group and then focus on the four elements worth salvaging from ETTA as listed
above. There is a notional value associated with the four critical elements this is anticipated
to be approximately $2M. Additional investment of about $3-4M will be required to relocate
ETTA and realign its training technology to meet the new wave of training demand that will
sweep this country in the next ten years.
The next step:
1. Decide and commit to a preferred option.
2. Develop the business case.
3. Develop and issue a prospectus.
4. Pursue the preferred option and close the deal.