Bankers sceptical state assets will be sold

Few investment bankers expect some of the most high-profile assets identified for sale by the National Commission of Audit -- Snowy Hydro and Australian Post -- will be sold off.

Australia’s senior investment bankers aren’t getting excited about potential deal flow from the 10 Commonwealth assets that Tony Shepherd’s National Commission of Audit has recommended be sold.

Bankers, who spoke to Data Room on condition they not be identified, say they expect few of the iconic assets the commission recommends will be privatised.

It is unlikely, the bankers say, that Snowy Hydro and Australian Postal Corporation will be sold to private investors because of widespread opposition to the sale of such national assets, especially from those who are among the current government’s most fervent admirers.

A planned sale of Snowy Hydro, which has a generating capacity of 3,756 megawatts, was scuttled in 2006 by a coalition of landowners, celebrities and environmentalists. Few bankers expect the government to try to sell the public works scheme again for fear of another political backlash. 

Australia Post, like Snowy Hydro, is potentially a political minefield. It may make sense for any buyer of Australia Post to reduce the number of post offices in order to try and improve the bottom line. But such an action will provoke vehement opposition from the current coalition government’s supporters in rural and suburban Australia.

Mr Shepherd and his four Commissioners are recommending that in the “short term” Australian Hearing Services, Snowy Hydro, Defence Housing Australia and ASC be sold. The commission did not define what it meant by the short term nor did it say how much it thinks the assets it is recommending for sale are worth.

“Apart from Medibank there is very little to attract investors,” says one senior investment banker.

Health insurer Medibank Private’s sale, in an initial public offering, is scheduled for the 2014-15 financial year.

The ASC, which builds naval vessels and had $27.7 million in EBITDA in the 12 months to June 30, 2013, is not seen as an attractive asset.

Still, some investors may buy Defence Housing assets as Westpac Funds Management did some years ago when it bought $220.1m of residential property on a lease back basis.

The following are the list of Commonwealth assets recommended for sale:

Short term:

Australian Hearing Services

Snowy Hydro

Defence Housing Australia

ASC

Medium term:

Australian Postal Corporation

Moorebank Intermodal Company

Australian Rail Track Corporation

Royal Australian Mint.

COMCAR

Long term:

NBN Co

Source: Australian Government National Commission of Audit

(Reporting by Brett.Cole@businessspectator.com.au

Editing by Victoria.Thieberger@businessspectator.com.au )

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