Australian gov’t to take full ownership of Snowy Hydro

New South Wales and Victoria have agreed to sell their stakes in the hydro scheme for nearly $5bn, which they will invest in other infrastructure projects.

Australia’s federal government will acquire stakes held by the state governments of New South Wales and Victoria in electricity generator Snowy Hydro for more than A$6 billion ($4.68 billion; €3.77 billion), making itself the sole owner of the power scheme.

The Australian government already holds a 13 percent stake in the largest hydropower producer in Australia, which it describes as a critical player in the national electricity market. Snowy Hydro owns and operates 5.5GW of generation capacity including the Snowy Mountains Scheme, an integrated water and hydro-electric power utility built in 1949, as well as some gas and diesel generation.

The three governments agreed the fair market value of Snowy Hydro stands at A$7.8 billion. Allowing for Snowy Hydro’s debt, NSW will receive A$4.15 billion for its 58 percent stake in Snowy Hydro and Victoria A$2.08 billion for the remaining 29 percent interest.

NSW and Victoria have committed to investing the sales proceeds in “productive infrastructure”, with a view to boosting economic growth in their respective states.

“This is simply a change in the ownership of the shares in the company and for Snowy Hydro it’s very much business as usual,” said the utility. “We’re continuing to progress the Snowy 2.0 project as we move towards a final investment decision which will be made by our independent board of directors,” the utility stated, referring to the expansion scheme that would add an additional 2GW of dispatchable generation and 350,000MWh of large-scale pumped hydro storage.

The expansion project, which is estimated to cost between A$3.8 billion and A$4.5 billion, has generated a lot of interest from the market due to its national significance and Snowy Hydro’s BBB+ credit rating, a spokeswoman for the utility told Infrastructure Investor.

“Snowy Hydro will use debt and equity to fund the project. The structure and total amount will be determined by our independent board of directors and shareholders with the final investment decision expected in late 2018,” she said.

“We will structure the debt to ensure we can make staggered drawdowns to match the construction capital expenditure profile, which will extend into early 2020s. The remainder of the project costs will be funded through internal revenue streams,” she added.

Snowy Hydro has been a topic of privatisation discussions in Australia since 2006 when the three governments intended to sell their interests at that time. The privatisation was soon called off as the federal government withdrew from the transaction, in response to public community concerns.