NSW May Sell Electric Network to Cover Debt

New South Wales is considering the sale of its state electricity network to raise funds.
Published: Wed 30 Apr 2014

Unions and the New South Wales Opposition continue to raise fears that the poles and wires of the state's electricity distribution network will be sold off.

Funding infrastructure projects and recovering debt

New South Wales is seriously considering the sale of its state-owned electricity network in order to help fund much needed infrastructure projects. Transaction analysts estimate that the sale may raise US$32 billion.

State Premier Mike Baird explains that the sale is “…something the cabinet and the government will consider since building infrastructure is probably the critical issue we face.” He adds that the model of selling state assets to fund projects needed by local communities is “very compelling” since there is a “huge amount” of capital tied up in the electricity network.

Mr Baird is expected to turn to investment banks for advice on the sale of New South Wales’ electricity network.

Australia’s most populous state has already sold ports and a desalination plant in order to finance road and rail projects. A full sale of the electricity network assets-poles and wires-could rack up approximately US$32 billion. This is according to Infrastructure Partnerships Australia.

Controversial

However, while the sale of ports has not received much public opposition, other assets such as energy distribution and social infrastructure are much more controversial, as the impact of potentially higher prices would be much more widely felt.

Australia’s antitrust regulator has already blocked the New South Wales government’s planned A$1.51 billion sale of power plants to AGL Energy Ltd.

Shadow treasurer Michael Daley says that Barry O'Farrell's Treasurer Mike Baird has run the economy of the state and the state's budget into the ground and that they are “desperate for cash”.

But the Government insisted the distribution network, the poles and wires that take the electricity from power stations to homes and businesses would remain in state hands.

Following suit

The Baird model of selling brownfield infrastructure assets and using the proceeds to fund new infrastructure, such as the WestConnex road, has proved very successful, with federal and state governments talking about it as a model to imitate.

Queensland’s government has already signalled its intention to sell the ports of Gladstone and Townsville as well as electricity assets in an effort to reduce the state’s debt. Darwin’s port may also be sold, while Western Australia’s government is studying the potential sale of some of its port, power and water assets as well as land held by government agencies and departments to help the state regain the triple-A credit rating it lost last year.