Upcoming sale of NSW electricity generators & impact on your business

by Energy Action | Dec 19, 2013
We have known for quite some time that the O'Farrell government wants to sell electricity generators in New South Wales in order to raise more than $2 billion dollars1 for major road, rail and airport infrastructure projects and there is some speculation that selling off the State’s power stations may put upward pressure on electricity prices.
We have known for quite some time that the O'Farrell government wants to sell electricity generators in New South Wales in order to raise more than $2 billion dollars1 for major road, rail and airport infrastructure projects and there is some speculation that selling off the State’s power stations may put upward pressure on electricity prices.

The sale process began in July 2013 for New South Wales state-owned Macquarie Generation (MacGen), which produces about a quarter of NSW’s electricity from the Hunter Valley power stations, Liddell and Bayswater1. Short-listed parties bidding for MacGen include AGL Energy, ERM and China Shenhua. The deal would encompass two coal-fired stations with a 4,600MW capacity.2

The NSW Treasurer Mike Baird recently announced that Vales Point and Colongra power stations would be sold, with the government hoping to receive more than $700 million dollars.3

And in more recent news, the Australian Financial Review reports that Chinese group Shenhua has withdrawn from bidding, leaving AGL Enegy, ERM Power and Marubent Corporation in the running.4

Key dates

Indicative bids were lodged back in October 20135 with final bids are due at the end of January 2014, and indications are that the transmission network (poles & wires) will remain in public ownership.6

Impact on your business

In real terms, and after deducting carbon tax costs, spot prices for electricity in the mainland NEM states are close to their six year low point, and the way in which the price of electricity may be impacted by the sale and transition of the generators into private ownership in the future is unclear. With this uncertainty and the risk of fluctuating electricity prices as a result of the sale, it may be beneficial for NSW businesses to consider renegotiating their energy contracts sooner rather than later to try and lock in current rates.

What do we suggest?

NSW businesses concerned about the uncertainty surrounding electricity prices as a result of the privatisation of NSW power plants may consider securing future energy rates by negotiating forward contracts. Energy Action suggests going to market well ahead of your actual contract end date.

Businesses owners may also benefit from an assessment of their current energy billing to validate the correct rates and tariffs are being charged on the energy contracts.

Energy Action provides a full energy management solution, which includes:

  • Energy Procurement
  • Contract Management & Energy Reporting
  • Sustainability Solutions

Sources

  1. M Coultan, “NSW puts Macquarie Generation assets up for sale,wants $2bn-plus”, The Australian, July 30 2013
  2. A MacDonald-Smith, “AGL, Shenhua vie for MacGen plants”, Australian Financial Review, October 21, 2013
  3. M Coultan, “NSW Government to sell power stations for $700m to raise funds for infrastructure projects”, The Australian, December 11, 2013
  4. http://www.businessspectator.com.au/news/2014/1/8/energy-markets/macgen-bidders-down-three
  5. http://www.businessspectator.com.au/news/2013/11/6/energy-markets/macgen-sale-down-shortlist
  6. Foschia, L. ‘NSW Nationals party opposed to selling poles and wires’, ABC online, 17 June 2013