The deal, struck with the NSW Government and Snowy Hydro Ltd yesterday, will lead to a massive initial public offering by June that could raise up to $3 billion.
Sales and floats of renewable energy floats assets have produced strong outcomes in the last few months, and hydroelectricity is particularly suited to generating power for peak periods.
Brumby said the state had been left with no choice but to sell, after New South Wales announced in December it would sell off its majority 58% stake and the Federal Government said last week it would sell its 13% equity.
He said Victoria had negotiated a deal that would protect irrigators' rights and environmental flows.
"Following NSW's decision and following the commonwealth's decision, the question for Victoria was not whether Snowy Hydro would be privately operated but it was really the shape of that private operation," Brumby said.
Under the deal, environmental flows will increase to 21% by 2012 and to 28% in the long term.
Snowy Hydro is Australia's largest supplier of renewable energy, generating about 4% of the nation's electricity each year.
Located mainly in Kosciuszko National Park, NSW, the hydroelectric scheme also releases water into the Murray Darling Basin and the Snowy River.
Victoria and NSW will each put $30 million of their sale proceeds into environmental programs, but the bulk of Victoria’s funds would go into school infrastructure, Brumby said.
The scheme has been valued between $2.5 billion and $3 billion.
Victorian independent MP Craig Ingram, who was elected in 1999 on a campaign to restore the Snowy River, described today's decision as "not a bad outcome," considering NSW had "put Victoria in an untenable position".
But he would have liked a greater commitment to flows and more money from the sale to have been put back into the river.
"The scheme has been built on the back of the Snowy River ... I would have liked to have seen a greater percentage of the windfall cash gain put back into the Snowy catchment," Ingram said.
Victorian National Party leader Peter Ryan said all the proceeds should go to water assets in country Victoria, not schools, and the money would be a slush fund for schools in marginal seats in the lead-up to the November election.
