Mike Baird sells electricity business TransGrid for $10.2bn

The NSW Government sells its electricity transmission business TransGrid to an international consortium for $10.26bn.

NSW Premier Mike Baird and Treasurer Gladys Berejiklian announce the successful consortium to win the lease of NSW TransGrid electricity network. Picture: Toby Zerna

The NSW Government has scored a major coup in selling its electricity transmission business TransGrid to an international consortium for $10.258bn.

The state government will get a net $7bn, after repayment of debt, as the first down payment for its $20bn infrastructure program, which is earmarked for major new rail lines and motorways.

The winning bid was led by Australian investors Spark Infrastructure and Hastings, along with Canadian pension fund Caisse de dépôt et placement du Québec and two Middle East sovereign wealth funds; Abu Dhabi Tawreed Investments Limited and Wren House Infrastructure, a wholly owned subsidiary of the Kuwait Investment Authority.

Overall, the consortium is 65 per cent foreign owned, but the winning bid was seen as more politically palatable than if State Grid of China, a previous favourite, had won.

The NSW Premier Mike Baird said it was a great day for the people of NSW. “We’ve taken a giant step in spending taxpayers’ money more wisely on things that make a difference to their daily lives like better schools, hospitals, public transport and roads,” Mr Baird said.

“This is a great result for NSW taxpayers and shows the comprehensive plan we took to the election is the right one for the future of NSW.”

He said that as part of the condition of sale transmission costs would be lower in 2019 than they were today.

Federal Treasurer Scott Morrison has imposed a series of conditions of the winning bidder, including that the operation and control of TransGrid remain in Australia, as well as electricity supply data and personal information.

Maintenance will have to done in Australia, except where it is not possible to do so on reasonable commercial terms.

And despite the consortium being 65 per cent foreign owned, Mr Morrison says that overseas consortium members have not be allowed to own more than 50 per cent of the company, which will have an independent chairperson and an independent director on the board who are Australian citizens and residents.

NSW Premier Mike Baird and Treasurer Gladys Berejiklian announce the successful consortium to win the lease of NSW TransGrid electricity network. Picture: Toby Zerna

Senior personnel in critical positions will also be required to hold security clearances.

Mr Morrison said: “These safeguards are more stringent than any previous conditions imposed on acquisitions of critical infrastructure. I am confident that these comprehensive safeguards address national interest considerations and will help underpin NSW electricity users having reliable electricity supply into the future.”

He confirmed that NSW will be eligible for the federal government’s 15 per cent incentive payment for the money it spends on infrastructure. This means the NSW government will gain an extra $1bn on top of the net $7bn it will get from the deal.

TransGrid’s business is tightly regulated by the Australian Electricity Regulator, which determines the price it can charge.

The AER has set significantly lower prices for the next five years for both TransGrid and the NSW distribution businesses, two of which will also be sold next year.

NSW Treasurer Gladys Berejiklian said: “This excellent outcome is a sign of the market’s confidence in the NSW economy as Australia’s number one state to do business.,

“We have delivered on our election commitment to lease TransGrid and will now work hard to deliver the much-needed infrastructure to transform NSW.”

Chief executive of Spark Infrastructure Rick Francis said they had paid a ‘full price” but that they were confident they could manage the business more efficiently than it had been under government ownership.

It was not all about ‘cost out”. By closely monitoring the assets of the business they would extend their life, avoiding capital expenditure.

He praised the condition of the transmission assets, saying they were relatively young.

Greens MLC John Kaye said the “over the odds” sale prices raised serious questions about what guarantees have been given to the consortium.

“If a top-dollar sale price was locked in with a series of contract sweeteners, then inevitably it will be consumers and the renewable energy industry who will pay,’’ Mr Kaye said.

“With annual revenues of only $2.2 billion, TransGrid was set to be the smallest of the leases yet it has brought in what looks like a highly inflated price.

“This will help Mike Baird politically and it will provide for additional infrastructure but inevitably the additional cash will be extracted from households.

“Somewhere hidden in this deal there will be a massive sting in the tail for NSW.”