Earlier this week, the federal government confirmed that it would sell its 13% equity in Snowy Hydro. The cash-strapped NSW government said late last year it intended to sell its majority stake via an initial public offering. It expects to make a much-needed $1.8 billion.
Victoria has a sound bank balance and would prefer to avoid the environmental and economic controversies that privatisation is likely to trigger, but it has little option but to join the sell-off.
Snowy Hydro owns a 3756-megawatt hydro-electric power generating system in south-eastern Australia, a power retailing business in Victoria, and the Valley Power and Laverton gas-fired generators in Victoria. It also owns the Red Energy retailing business in Victoria.
NSW has appointed Credit Suisse to advise on the sale of the peak power provider.
Snowy Hydro chief executive Terry Charlton has aggressive plans to grow the business.
He needs $450 million over the next five years just to maintain and upgrade the existing hydro power business. He also wants to spend a further $1 billion on new gas- fired, peak-load generation facilities.
Majority shareholder NSW needs these facilities but can’t afford to fund them. Privatisation is the only way forward.
