By SAS Group Consultant Jonathan Pavetto
The Queensland Premier has announced the Queensland election will be held on the 31st of January. The announcement was a surprise, as most commentators expected the election to be held later, towards the middle of the year.
The privatisation of government assets will be a politically important election issue in both Queensland and New South Wales, but the timing of the elections is also now very important. With an earlier election in Queensland, government-owned assets in Queensland will be ready for investment sooner than similar assets on offer in New South Wales, which is due to hold its election on March 28.
Following both state elections, the Queensland and New South Wales Governments will start their privatisation programs as soon as possible. With an earlier election date, Queensland is expected to start its privatisation program before New South Wales. Potential investors will need to start preparing now, to be ready for the transactions following the elections. Transactions could commence within months of the re-election of the LNP in Queensland and the Coalition in New South Wales.
The structure of the two parliaments in Queensland and New South Wales is also important. In Queensland, there is only one chamber (no upper house). So, if the Queensland Government makes a decision to lease its assets, it has no legislative barriers to the transaction. In New South Wales, the Government must also convince the Upper House in the New South Wales Parliament to support its privatisation plans.
Queensland’s governing party, the Liberal National Party (LNP), has confirmed a large privatisation program. The program includes the long-term lease of several government businesses, with a total estimated value of which amount to around AU$33.6 billion, 12% of state government assets.
The assets on offer for long-term lease in the privatisation program include:
- Electricity network companies, Powerlink (transmission), Ergon Energy and Energex (distribution);
- Amalgamation of Ergon Energy’s retail portfolio with Stanwell’s electricity generation assets;
- CS Energy’s retail and generation assets;
- Non-core business functions of Stanwell and CS Energy;
- The Port of Townsville, aggregated with the Mt Isa to Townsville rail line (excluding the Port of Lucinda)
- The Port of Gladstone (excluding the Port of Bundaberg)
- Separation and lease of SunWater’s industrial water pipelines;
Under the LNP’s plan, assets will not be offered for sale – the assets will only be available for a long-term lease of 50 years, with the option to extend the lease for another 49 years. This means, the Queensland Government can lease a 100% pecuniary interest in the assets to raise money to reduce public debt and invest in economic infrastructure, while retaining ownership of the assets. Many of the Queensland assets are highly profitable, particularly the electricity distribution and transmission network assets.
The LNP’s current plan is different to its original proposal, where it was proposing a hybrid model for investment in state-owned electricity network companies.
In New South Wales, the governing Liberal/National Coalition has also proposed a privatisation agenda, but it is a hybrid model and is limited to 49% ownership of government-owned electricity transmission (Transgrid) and distribution (Endeavour and Ausgrid) companies. The Coalition Government in New South Wales would still like to retain operational control of the electricity network assets.
In Queensland and New South Wales, the Labor Party (the main opposition party) and trade unions strongly oppose the LNP/Coalition’s privatisation plans to lease government assets. If the Labor Party wins either election, they will not proceed with the asset leasing agenda of the LNP Government in Queensland or Coalition Governments in New South Wales.
Current public opinion polling suggests both the LNP in Queensland and Coalition in New South Wales will be re-elected, but the Labor opposition in both states will gain some seats in both parliaments from the governing parties.
If you’re looking to invest in the Queensland or New South Wales proposed privatisation programs, the SAS Group is well placed to assist in all areas of the transaction – including strategy and planning, government relations, media and communications, FIRB and ACCC approvals and stakeholder engagement.