The Australian state of New South Wales has outlined plans to raise A$13bn (US$10.6bn) from the partial sale of its electricity grid, the latest move in a A$100bn privatisation wave to fund infrastructure spending and bolster flagging economic growth.
The Liberal government of the country's most populous state on Thursday said it would offer long-term leases for three of its “poles and wires” businesses, representing 49 per cent of the state’s electricity infrastructure.
The money raised will fund new road and rail projects, hospitals, and tourism and environmental projects at a time when the windfall of the country’s decade-long mining investment boom is waning.
“This plan future-proofs our state, boosting the economy by almost $300bn in just over 20 years, creating more than 100,000 jobs over that time,” said Andrew Constance, NSW treasurer.
Australia’s economy is cooling after a boom during which income tax rates fell and public expenditure grew, piling pressure on government finances amid a drop in the price of the country’s biggest export earners, iron ore and coal.
The country’s budget deficit grew to A$48.5bn in the year to the end of June 2014, up from $18bn the previous year.
In an effort to stimulate growth and create jobs, the Liberal-National federal coalition is attempting to sell government assets including the Royal Australian Mint, and is lobbying states to follow suit with sales of power assets and state-owned ports.
Joe Hockey, federal treasurer, has offered the carrot of tax incentives for states, provided they spend the money raised on infrastructure projects such as road and rail improvements.
Faced with the prospect of falling mining royalties, the northern state of Queensland is also considering selling long-term leases on its electricity networks. Last month the federal government raised $A5.6bn from the sale of Medibank, a commercial health insurer.
The NSW electricity asset sale will be triggered if Mike Baird’s Liberal state government is returned to power in an election set for March 2015 — an outcome that polls see as likely. The state’s Labor opposition opposes the sale.
Electricity transmission business Transgrid has been earmarked as the first of the NSW electricity assets to be put up for sale, to be offered on a 99-year lease.
Local media have reported that State Grid corporation of China and China Southern Power Grid are among international parties eyeing electricity assets in NSW and Queensland, as well as consortiums of Australian and overseas pension funds.
The government will retain full control of countryside electricity distributor Essential Energy, a move designed to appease political parties based in regional NSW.
The electricity leases will make up the lion’s share of the NSW government’s plans to spend $A20bn on infrastructure, with a $A2bn payment from the federal government’s asset-recycling plan and $A5bn from interest payments making up the difference.