Hawker Britton Occasional Papers and Media

NSW Energy Reform Transaction Strategy

10 September 2009

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The NSW Government today announced its final policy position for its Energy Reform Transaction Strategy.

An overarching goal of the Strategy, according to Infrastructure Minister Joe Tripodi, is to ‘secure a new entrant into the NSW electricity market.’

The private sector will have the first opportunity to acquire the assets, but the Government has reserved the right to float selected assets on the share market through the creation of new, independent listed entity (Initial Public Offering or IPO) to ensure its ‘competition and valuation objectives’ are met.

Expressions of Interest will open in late September and stay open for six weeks.  The Government has said it expects to finalise transactions in the first half of 2010.

Key features of the Transaction Strategy

Only the sites listed in the fourth point will be subject to a possible share market float, but will also be offered for sale in the initial process.

For potential investors, ACCC and Foreign Investment Review Board requirements will need to be met.

Gentrader sale

The Government’s three generating companies will be offered to the market in five bundles – each bundle representing the output of one power station or group of power stations.

This will cover:

Contracts will be written for the technical life of the power station.  This is to give investors the assurance the Government will not re-enter the electricity market once the contracts expire.

Once sold, Gentraders will make three types of payment to Goverment:

Owners of the contracts will be liable for costs associated with the Commonwealth’s proposed Carbon Pollution Reduction Scheme, but will be able to invest in existing plants to extend life, improve efficiency and reduce emissions.

As the Munmorah station on the Central Coast is scheduled to close in 2014, the Government will be offering a short term Gentrader contract for its output.  A buyer will be offered an option to acquire Munmorah as a development site at the expiry of the contract.

Development sites

Seven potential power station development sites will be offered to the private sector.

This includes sites for gas fired power stations at Bamarang, Marulan and Tomago, and sites for gas/coal fired power station sites at Mount Piper and Bayswater.

Delta Electricity and Macquarie Generation have lodged Major Project Applications for potential power stations at the Mount Piper and Bayswater B sites. The Major Project Applications provide for either gas or coal fired plants.

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