NSW Asset Sale

by Energy Action | Apr 09, 2015
Following the Liberal Party’s state election victory in NSW, the privatisation of the Networks and $20 billion infrastructure program are now very likely to proceed.

Following the Liberal Party’s state election victory in NSW, the privatisation of the Networks and $20 billion infrastructure program are now very likely to proceed.

The Liberal Party’s state election victory means the $13 billion NSW electricity assets sale is expected to be on top of Premier Mike Baird’s agenda with the expectation that the assets will now be placed on sale sometime after May.

Mr Baird said for TransGrid, – 100% of which is being sold by the government – their advice was the best result would be achieved through a trade sale.  However he said the 50.4 per cent sales of Ausgrid and Endeavour Energy could be a public float, similar to Telstra and the TAB, allowing mum and dad investors to take part in buying the state’s electricity assets.

TransGrid, Ausgrid and Endeavour Energy, all trade in the National Electricity Market (NEM), and so their respective distribution services are largely subject to the Australian Energy Regulation, which is responsible for the economic regulation of electricity networks in the NEM.  Therefore before any deal can be done in NSW, the Australian Energy Regulator has to hand down a ruling on how much revenue the new owner of the electricity networks can secure from the assets.  It is anticipated that it will be substantially less than the current level.

The Networks in New South Wales are currently 100% State owned and comprise of:

  • TransGrid – a transmission business which owns, operates and manages NSW high voltage electricity network connecting generators, distributors and major end users in NSW and the ACT. It has a regulated asset base of $6.1 billion and 12,800 kilometres of overhead high voltage transmission lines operating at voltages of up to 330 kV. The network is interconnected to Queensland and Victoria through six interconnectors.
  • Ausgrid – a distribution business which owns, operates and manages the electricity network that supplies power to about 1.6 million homes, businesses and industries located throughout Sydney, the Hunter Valley and the Central Coast of NSW. Ausgrid has a regulated asset base of $14.4 billion and 41,000 kilometres of distribution lines, more than 200 large electricity substations and 500,000 power poles.
  • Endeavour Energy – a distribution business supplying electricity to 2.2 million people across Sydney’s Greater West, the Blue Mountains, Southern Highlands, the Illawarra and the South Coast regions of NSW. Endeavour Energy’s asset base is comprised of a network spanning 24,500 square km made up of more than 413,000 power poles, 178 major substations and 30,000 distribution substations.

The intention is to undertake trade sales for all three businesses. However, the Government has said it will retain flexibility to consider an IPO for Ausgrid or Endeavour Energy should market conditions indicate that this would result in a better outcome for the State.

The Government says that it remains committed to a number of strict conditions for the partial lease of the network businesses including:

  • All net proceeds will be invested in new productive infrastructure, through the Restart NSW Fund;
  • The transaction will have no adverse impact on electricity reliability;
  • The regional presence of the network businesses will be maintained.

The Government has said that it would not divest its interests in Essential Energy – a distribution business with 800,000 customers, a regulated asset base of $6.8 billion and 200,000 kilometres of distribution lines.

2 comments

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  1. australian investor | Apr 11, 2015
    Govt should do an IPO, a trade sale prevents the listed market and general public from bidding in the auction. An IPO increases auction participants, offers all investors better liquidity and transparency.
  2. Gerald Banson | Apr 10, 2015
    If only we weren't being raped with Network charges, electricity use for our coy last month (March 15) was $2053.00 BUT THE NETWORK CHARGES WERE $8419.00 obviously we have made a large contribution to the asset that the NSW Government is seeking to privatise, our network charges are frequently in excess of $10K per month.

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