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NSW power sale: State switched on for success

WHAT a difference a week makes. It was just a matter of days ago, Premier Mike Baird was offering the grandest of mea culpas over the dogs. Now he’s leapt from the boxes, announcing a $10b Western Metro rail link, funded by a $30-40b budget bonanza.

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A $10 billion Western Metro rail line — the state’s third Metro link — to snake from the CBD through the Bays Precinct out to Parramatta is the Baird government’s next big project to be funded from a surprise $30-40 billion-plus bonanza from the sale of electricity assets.

Having gone to the 2015 election promising to raise $20 billion from the sale of half the electricity networks, including interest, a delighted Premier Mike Baird and his Treasurer Gladys Berejiklian yesterday announced they were leasing 50.4 per cent of poles and wires operator Ausgrid for 99 years for $16.2 billion to an Australian buyer.

This is on top of last year’s $10.2 billion sale of Transgrid, with the leasing of half of Endeavour Energy still to come.

Related: Mike Baird has done what those before him could not

He’s so happy. The Western Metro Rail Line
He’s so happy. The Western Metro Rail Line
The power sell off has resulted in a major windfall for NSW. Picture: Ian Svegovic
The power sell off has resulted in a major windfall for NSW. Picture: Ian Svegovic
“Today is the biggest infrastructure investment in the history of this state.” Picture: Adam Yip/ The Daily Telegraph
“Today is the biggest infrastructure investment in the history of this state.” Picture: Adam Yip/ The Daily Telegraph

After debt is paid down from the companies, net proceeds to the government from Ausgrid are $6 billion and net proceeds from Transgrid are $7 billion.

The sales clear the balance sheet so the government can borrow the remaining billions to fund its massive infrastructure boom without risk of losing its AAA credit rating.

The government is now facing the prospect of raising a staggering $35-40 billion from the partial leasing of the three electricity networks.

“Today is the biggest infrastructure investment in the history of this state,” Mr Baird said. “The possibilities are endless.”

Net proceeds to the government from Ausgrid are $6 billion and net proceeds from Transgrid are $7 billion.
Net proceeds to the government from Ausgrid are $6 billion and net proceeds from Transgrid are $7 billion.
An artist's impression of North West Rail Link
An artist's impression of North West Rail Link

Those possibilities include the construction of the new F6 motorway south of Sydney, a tunnel under the Spit Bridge and a second Sydney Harbour road tunnel, linking the north and south without travelling through the CBD.

But right up on the list, according to senior government sources, is that third Metro line from the CBD to Parramatta — taking pressure off the above-ground rail line which is already near capacity.

There has even been a suggestion that in the Transport Master Plan, to be released next year, the Western metro could be extended from the CBD and down south to Maroubra as well.

Planning has also begun on an M9 Orbital ring road in the city’s west, outside of Penrith, and there are other plans for upgrades to the Bells Line of Rd and other major roads.

This is on top of the already-committed North West Metro, South West and City Metro and WestConnex ­Motorway projects.

The government is expected to commit a third of the infrastructure funds to the bush and build hospitals and schools, including an already flagged hospital in North West Sydney, most likely at Rouse Hill.

“Obviously you don’t want to spend the money from the third lease before it’s done but we’re in a position where we expect to be able to do more and that’s a wonderful position to be in,” Mr Baird said.

Premier Mike Baird during question time.
Premier Mike Baird during question time.

The sale of Ausgrid to superannuation giant AustralianSuper and investment house IFM was an unsolicited proposal following a previous tender process, which led to the rejection of the preferred Chinese tenderer State Grid after it was blocked on national interest grounds.

The government said IFM and AustralianSuper’s bid was found to be “unique” — and therefore qualified not to go through a tender — because it was an all-Australian bid, something the government felt it required.

In a measure the government hopes allays any concerns about future electricity price rises, the sale was also given a tick of approval by Electricity Price Commissioner Allan Fels, and the buyers have given a guarantee to have network prices in 2019 lower than they were in 2014.

Mr Baird lashed out at critics, including the Opposition and unions who ran a massive scare campaign about the “poles and wires” sales during the election campaign.

“People were saying you’re not going to be able to raise the money you expect for this — well, we not only have but we’ve done better than that. The only people who benefit are the great people of this state,” Mr Baird said.

“Today is the biggest boost to infrastructure in NSW’s history. On the back of today we are underwriting for future generations rail, roads, schools and hospitals.

“NSW will never be the same again off the back of this investment transaction.”

The Opposition claimed the government should have gone to open tender again on the sale, but Ms Berejiklian said: “What this does is take away any element of risk whatsoever in relation to the FIRB (Foreign Investment Review Board) process.”

Meanwhile, a “city deal” between the NSW government and Commonwealth is expected to create more than 100,000 jobs but both leaders have declined to spell out how it will work.

Prime Minister Malcolm Turnbull and NSW Premier Mike Baird on Friday signed a Memorandum of Understanding for a Western Sydney City Deal - which includes the Badgerys Creek airport, and more jobs and transport options. But both men were scant on detail, instead sticking to broad-sweeping statements about jobs and growth.

“Historically, there has been very little co-operation. The levels of government have often been passing each other like ships in the night,” Mr Turnbull told reporters.

Western Sydney’s population was set to reach 1.4 million by 2036, and this new deal would help build another 180,000 homes to support growth, a joint statement said.

Sydney’s second airport was expected to create 9000 jobs by the early 2030s and another 60,000 in the following decades.

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Original URL: https://www.dailytelegraph.com.au/news/nsw/nsw-power-sale-state-switched-on-for-success/news-story/b108477a5fecda8e25ab5b914232267a