10 reasons why Mike Baird's privatisation is a dud deal for NSW

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NSW Labor today declared the Baird Liberal Government’s plan to privatise the electricity network a dud deal for the state – outlining the 10 reasons why his risky power privatisation plan won’t work.

Mike Baird has claimed that he will have $20 billion from his power privatisation plan, coming from:

  • $13 billion of net proceeds from privatising the electricity network;
  • $2 billion in asset recycling incentive payments from the Commonwealth Government – for spending the proceeds on infrastructure starting from 2019;
  • $5 billion of interest on the net proceeds and incentive payments from putting the funds in Restart NSW for ten years

However, under scrutiny the Liberals power privatisation plan simply doesn’t add up.

10 Reasons why Mike Baird’s Power Privatisation Plan won’t work:

1.    Investment Bank UBS – who has been given the contract to sell the electricity network – says the sale will only generate proceeds of between $10.4 billion and $10.9 billion;

2.    The draft Australian Energy Regulator (AER) determination would significantly impact the profitability of the electricity network and therefore reduce the sale price;

3.    The legislation for asset recycling payments is yet to pass the Senate – leaving a $2 billion blackhole in Mike Baird’s figures;

4.    Amendments to the asset recycling payment legislation currently before the Senate, will require the Senate approve any incentive payment for a privatisation or a project;

5.    Privatising the electricity network requires authorising legislation to pass the Legislative Council and is opposed by Labor and two of the cross-bench parties;

6.    The Government may fail to find a bidder willing to pay the retention price – as recently occurred in December 2014 when the Government failed to sell the Vales Point electricity generator;

7.    The State will lose up to $1 billion each year in profits and payments we currently receive each year from owning the electricity network – money which currently pays for nurses, teachers and police;

8.    Mike Baird claims he will earn $5 billion from interest payments over 10 years – but he needs to start spending the money by 2019 to be eligible to get the Commonwealth asset recycling incentive payments;

9.    Putting the proceeds in the bank for ten years to earn $5 billion will mean no additional money can be spent on infrastructure during this period – while we lose up to $1 billion each year of profits and payments we currently receive from the electricity network;

10.  International ratings agency Standard & Poors has warned that the AER’s draft determination could affect the credit rating of NSW's electricity network businesses and threaten the ability to raise the claimed $13 billion from the sale.

“Mike Baird and the Liberals privatisation plan simply doesn’t add up,” Shadow Treasurer Michael Daley said.

“The Liberals are relying on a risky sale of our electricity network in an unpredictable market to fund their infrastructure promises.

“What is Mike Baird’s plan if he can’t sell the electricity network?  What if he doesn’t get his promised $20 billion?

“Which projects will Mike Baird cut if he sells the electricity network for less than $13 billion – or fails to get the asset recycling or interest payments his risky plan is relying on?

“How will Mike Baird fill the $1 billion black hole in the budget after he loses the profits currently returned to the state from owning the electricity network?

Shadow Energy Minister Adam Searle said: “Labor’s plan stands in stark contrast to the Liberals risky strategy – we will pay for our commitments using proven and reliable sources of funds.” 

“Labor will make modest commitments with the right priorities – and we will not rely on privatising our electricity network.”