It pays to be united

Before the state election in March Barry O’Farrell stated he would not sell the power industry. This article looks at some of the other issues around O’Farrell’s power sell off plan.

1. Barry O’Farrell promised he would not sell the generators before the last election.
Before the last election, Barry O’Farrell said:
“We have absolutely no plans to privatise either the generators or the poles and wires”
(Lithgow Mercury, 29/1/11).
Barry O’Farrell has misled the people of NSW. He should let the people of NSW have a say and take any proposed sale of our electricity generators to an election.
Any politician from any political party that intends to vote for the privatisation of NSW generation has no mandate to sell NSW power stations.

2. NSW people want our power stations owned by the NSW Government.
Independent polling shows that:
•    81% of people oppose foreign ownership of our electricity assets.
•    Over 70% of NSW people believe that power generation should be owned by the NSW Government
•    62% say they should have make a choice between public ownership and the sale of essential assets
It is clear that the people of NSW want their power stations owned by the NSW Government.

3. Who is pushing for the sale of our generators?
The main groups pushing for the sale of our generators are peak business groups and those that will benefit financially from any sale including:
•    Nick Greiner,
•    The Sydney Business Chamber,
•    the NSW Business Chamber and,
•    Most vocally, Infrastructure Partnerships Australia.
All of these groups represent big business that will profit from the sale of NSW generators.

4. Generators are very profitable and provide a health revenue stream for the NSW Government.
Over the past few years, the Government owned generators have provided the NSW Government with more than half a billion dollars every year.
The State owned Generators produced the following income in 2010:
Delta Electricity         $55.8Million
Eraring Energy            $111.6Million
Macquarie Generation        $197.1 Million
Estimated interests/tax        $168million
Total                $533million
The campaign by private business to privatise NSW generators is in fact a campaign to redirect this revenue stream to private corporations.

5. Don’t we need to sell our generators so that the private sector will build new power plants?
Jeff Kennett told the people of Victoria that privatisation would lead to increased investment in the sector. Generators along with the entire Victorian power industry were privatised in 1995.
Since that time there has been no new base load power plants built. There has been investment in peaking plants – gas plants that provide electricity during peak periods to maximise profit.
Privatisation has not helped provide the people of Victoria with their growing power needs. The responsibility for this investment will remain with the Victorian Government. Government will privatise the assets but will not privatise the risk.

6. Effect on Jobs
Following privatisation in Victoria thousands of electricity workers were sacked by the new owners as they reduced their overheads and expenses. This resulted in cut backs in other areas like maintenance and inspections which has had catastrophic consequences.
The privatisation of NSW generators will have the most impact in regional areas, including:
•    Lithgow (Delta Electricity)
•    Mt Piper power station
•    Wallerawang power station
•    Hunter Valley/Muswellbrook (Macquarie Generation)
•    Liddell power station
•    Bayswater power station
•    Central Coast
•    Eraring power station (Eraring Energy)
•    Vales Point power station( Delta Electricity)
•    North & South Coast
•    Condong/Tweed (Delta Electricity)
•    Shoalhaven (Eraring Energy)

7. Value of the NSW Power industry
The NSW generators have been valued at around $4 – $6 Billion Dollars. However, the generators carry a debt of $2.8 Billion. This means that the Government will end up with between $1.2 – $3.2Billion.
This will be a fire sale. This will not fix the states infrastructure problems and it will not secure future investment in baseload generation!
The sale will cost NSW tax payers annual revenue of more than $500 million per annum.

8. What about the Gen Traders?
On the 14th December 2010, the NSW sold the trading rights for:
•    Eraring power station to Origin Energy, and
•    Delta’s Mt Piper and Wallerawang to TRUenergy.
Trading rights for Macquarie Generation and Delta Coastal at Vales point have remained in Government hands.
There are many options for the future of NSW generation including:
1.    The Government could maintain the status quo.
2.    The Government could buy back the gen trader contracts for Delta West and Eraring power stations and return the sector to public ownership, or
3.    The Government could sell the generators.

9. Why selling the generators is the worst option
As Origin Energy is the owner of the generation output of Eraring, if the Government attempts to sell this power station, there will be only one bidder – Origin Energy. This will not realise the full value of the asset and it will not represent value for NSW residents.
The same can be said about Delta West and TRU Energy.

10. What will happen to the price of electricity if we sell the generators?
Prices will rise if we sell our generators. The sale of our generators is a bad deal for the people of NSW.
Government ownership will ensure that generators continue to provide a steady revenue stream for reinvestment in other services like schools, roads and hospitals, high levels of reliability in the electricity sector and good jobs for regional areas in NSW.
The future of our power industry will require a significant investment and the only way to ensure that this happens is for the Government to maintain ownership.

Attachments:

Member Update 5 December 2011

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