Australia debates sell offs as elections loom

02 October 1998

The forthcoming state and federal elections being held in Australia have sparked bitter political disputes over the planned privatisations of state electricity systems. While some groups are in favour of selling off electricity assets as a method of raising much needed finance, others see such a move as tantamount to treason.

In South Australia, the Liberal government has been keen to raise funds from an outright sale of Optima Energy and ETSA Corp., but has to pass the relevant statutes through the upper house. The Liberals had needed two extra votes, but the legislation passed to a second reading with the help of an independent MP and a rebel Labour MP who crossed the floor. However, the independent MP, Nick Xenophon, has threatened to block any privatisation bill that did not include a public referendum, despite being in favour of a sale.

The SA state premier, John Olsen, rejected calls for a referendum, although a select committee is due to report to parliament at the end of October on whether a sales committee should be established to examine the sale, and a possible referendum.

Should the necessary legislation fail to pass, the government could investigate a lease option on the state electricity assets. Investment bankers and industry analysts feel that offering a long-term 99 year lease, with unfettered control, would enable the assets to be transferred at only a small discount on the outright sale price, estimated to be in the A$5-6 billion (US$3.13-3.75 billion) range. Politically, this is a far more attractive option for the sale as public opposition to privatisation has grown following disappointing results from earlier sell-offs, notably the recent Auckland blackout.

In New South Wales (NSW), the Australian Labour Party (ALP) has been forced to back down on proposals to privatise the state's electricity assets. The ALP mooted privatisation last year under the auspices of the NSW premier, Bob Carr, and the treasurer, Michael Egan. However, a power play between right wing unions and the far left of the party rejected the privatisation plan at last October's annual meeting. Carr had planned to raise the issue at the next annual meeting, but the proximity of the upcoming state elections has led to Carr reneging on the pledge as the party's annual conference has now been postponed until after the vote.

The National Party in NSW, in an opposition coalition with the Liberals, while supporting privatisation has insisted that the state retain majority ownership of the system and that any sale is conducted through a public offering, rather than through trade sales. Analysts have pointed to previous issues and suggested that the National Party demands for limited ownership and a public offering may wipe as much as A$3 billion (US$1.87 billion) off the value of the sale, as compared to a trade sale offering majority ownership.

The leader of the NSW opposition, Peter Collins, is committed to privatisation of the industry and plans to invest the proceeds in rural redevelopment for the state and in clearing state debts of A$13.6 billion (US$8.5 billion). The NSW electricity system is estimated to be worth A$25 billion (US$15.6 billion) and, if the opposition win the election, it is almost certain to be sold, despite significant opposition within the electorate.

Elsewhere in Australia, a poor result in Tasmanian state elections for the Liberal party has been blamed on its commitment to privatisation of the state's Hydro-Elec-tric Corporation (HEC). Tony Rundle, the former state premier, had pledged to sell the corporation in order to clear state debts of A$3.2 billion (US$2.0 billion) and reinvigorate the economy. Rundle called an early election after the minority government failed to secure Green party support to sell or lease the three components of HEC.

Following the election, the Labour party, under the leadership of Jim Bacon, emerged with a majority in the House. This came despite a pledge from the national premier, John Howard, to write off A$150 million (US$93.7 million) of state debt only on the condition that HEC was broken up and privatised. Premier Bacon pointed out that the election result was a warning to Howard for the forthcoming federal elections that the electorate is firmly opposed to the privatisation of such assets. Bacon also challenged Howard to write off the A$150 million without privatisation strings attached.





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