However, the 10% limit on individual shareholding will only be effective for four years, after which time shareholders will be asked to vote on whether to keep the cap in place.

Other protective measures that the finance ministers announced yesterday include:

· The head office of Snowy Hydro must remain in Australia;

· Two-thirds of the directors of the board, including the chairman of any meeting of the board and shareholders must be Australian citizens;

· The privatised company must maintain a substantial business and operational presence in Australia;

· Snowy Hydro must remain incorporated in Australia.

Currently, the NSW Government owns 58% of the 3700MW Snowy Hydro-electric scheme, with the Victorian Government holding a 29% stake and the Australian Government (13%).

Snowy Hydro has been valued at $A3 billion and is set to be sold to the public via a prospectus due this month. It is expected to list and begin trading on the market in mid-July.

The company’s Snowy Mountains Hydro-electric Scheme generates electricity and controls the Snowy River’s flow into Victoria by diverting water to the Murray and Murrumbidgee Rivers for irrigation.

Snowy Hydro can turn on its massive generators very quickly, going from idle to full power in five seconds. It makes most of its profit by playing the volatile national electricity market and selling hedging products to electricity retailers to protect against huge spikes during peak power periods.

Electricity prices can rise from an average of $40 a megawatt hour to up to $10,000 a megawatt hour during extreme peak times, and Snowy Hydro has agreements with retailers to sell power at prices at the lower end of the scale when the market peaks.