THE NSW power industry has generated nearly as much money for the state's taxpayers over the last 15 years as Victoria raised from the sale of its power industry, budget figures show.
Victoria reaped an estimated $21.7 billion from the sale of its power industry which began in 1992 and was finished later that decade.
Since 1996, taxpayers in NSW have received at least $15 billion in taxes and dividends from the state-owned power industry, while retaining full ownership of it. Bids close today on the sale of parts of the industry. The sale is expected to generate up to $10 billion, with the government retaining control of all the "hard assets".
For sale are the three power retailers - EnergyAustralia, Integral Energy and Country Energy - along with output of the three generators - Macquarie Generation, Delta Electricity and Eraring Energy - and some development sites. Not for sale are the "poles and wire" high voltage transmission network, the local distribution network or the power generators.
The government's electricity assets are highly profitable and a significant contributor to the state's finances, supplying $1.2 billion this financial year alone in dividends and taxes. As well, a further $544 million this year, rising to $798 million by 2013-14, is budgeted to be raised from a guarantee over the borrowings, mostly of the power companies.
"In the last few years, before the recent IPART-approved price rises, in dividend and tax returns from these assets, the state government has achieved a return of 24 per cent per annum," Bob Walker, a professor at the University of Sydney, said.
"That means that any sale price is likely to be dwarfed by the potential value to taxpayers from retaining these assets."
A 24 per cent return indicates that for every dollar invested, it would generate the equivalent in profits in about four years. This compares with an average 18 per cent return for Australia's banks in recent years, which has triggered complaints of profit gouging.
Staff in the power companies have been told to expect sales to be finalised by year's end. Origin Energy is widely expected to acquire EnergyAustralia and AGL to acquire Integral. The Energy Minister, Paul Lynch, was stripped of his control over the power industry only days ago. In a little noticed move, the Premier, Kristina Keneally, approved giving full control over the state-owned power companies to the Treasurer, Eric Roozendaal, last week.
The decision to sideline the Energy Minister, a leading member of the party's Left, from any control over the utilities or sway over the sales process is aimed at avoiding a clash with the Left, said the Greens MP John Kaye.
"The NSW government clearly does not trust its own Energy Minister to issue instructions to the boards of the state-owned energy companies to sell the key business activities," Mr Kaye said. "Paul Lynch sensibly wants nothing to do with the disastrous privatisation.
"Treasurer Eric Roozendaal is facing a revolt over an unpopular and dangerous privatisation. Energy Minister Paul Lynch had to be stripped of his powers so that the Treasurer can ram through his power sell-off.
"The Keneally government has been forced to shatter the longstanding tradition that separates portfolio and shareholding ministers ... [and] has delivered the Treasurer a massive conflict of interest. He is now both regulator and owner."
A spokeswoman for the Premier said the move was made "to facilitate the timely execution" of the sale of the power industry assets.
Frequently Asked Questions about this Article…
What is the NSW power industry sell-off and how much money is it expected to raise?
The NSW government is selling parts of its power industry — mainly the three retail businesses and the output of three generators — with bids closing today. The sale is expected to generate up to $10 billion, while the government says it will retain control of the core "hard assets."
Which power assets are actually for sale in the NSW privatisation?
For sale are the three power retailers (EnergyAustralia, Integral Energy and Country Energy), the output of the three generators (Macquarie Generation, Delta Electricity and Eraring Energy) and some development sites. Not for sale are the high‑voltage transmission "poles and wires," the local distribution network or the physical power generators themselves.
Which companies are widely expected to buy NSW power retailers?
The article reports that Origin Energy is widely expected to acquire EnergyAustralia and AGL is widely expected to acquire Integral Energy, according to staff and market talk cited in the report.
How much have NSW taxpayers already received from the state-owned power industry?
Budget figures cited in the article say NSW taxpayers have received at least $15 billion in taxes and dividends from the state-owned power industry since 1996, including $1.2 billion in the current financial year.
What ongoing revenue from the power companies is the government budgeting for?
The budget expects $544 million this year from a government guarantee over borrowings (mostly of the power companies), rising to $798 million by 2013–14, in addition to dividend and tax receipts.
How profitable have NSW electricity assets been for taxpayers compared with other sectors?
University of Sydney professor Bob Walker is quoted saying the state government has achieved a 24% per annum return from dividend and tax returns on these assets in recent years, compared with an average 18% return for Australia’s banks over the same period mentioned in the article.
What political and governance changes accompanied the power sell-off?
The Premier approved transferring full control over the state‑owned power companies from the Energy Minister, Paul Lynch, to the Treasurer, Eric Roozendaal. The move prompted criticism — including claims of a conflict of interest and concerns from the Greens and others — while a spokeswoman for the Premier said it was done to "facilitate the timely execution" of the sale.
What are the main concerns for taxpayers and investors about selling these power assets?
Critics in the article argue that because the power assets have been highly profitable for the state, any one‑off sale price could be dwarfed by the ongoing value of retaining them. The report also notes public complaints about profit gouging and the political controversy surrounding the privatisation process.
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