Queensland to offer grid leases to private sector

The move is controversial, but expected to generate proceeds of around A$28bn.

In a move likely to arouse strong interest among private investors, the Queensland state government in Australia has announced plans to offer long-term leases of its electricity transmission networks.

The government had initially planned to offer the private sector minority equity stakes in exchange for dividends but not control of the assets – but this did not prove popular with the investment community. In order to drum up interest, it has effectively gone down the route of privatisation.

Leases of either 50 years or 99 years will be offered for the state’s three network companies – Powerlink, Energex and Ergon Energy – in a move that is expected to deliver proceeds of around A$28 billion (€19 billion; $25 billion).

The move – while popular in the business world – is controversial among members of the public. Voters turned against the previous administration in Queensland, in part because of its privatisation of public assets.

Brett Himbury, chief executive of Melbourne-based fund manager IFM Investors, told The Australian Financial Review that the privatisations would be “contingent upon community support”. He was also reported saying that there would need to be a balance between attracting foreign investment and “on-going Australian ownership of these assets”.

The Queensland announcement follows a similar one by the New South Wales (NSW) government in the summer, when it said it would be offering 49 percent stakes in its “poles and wires” assets on 99-year leases. Together, the Queensland and NSW sales would be expected to raise A$48 billion.

Both the Queensland and NSW processes would be expected to benefit from the federal government’s recently announced A$5 billion asset recycling plan, which offers financial incentives to states which sell assets and then invest the proceeds into new infrastructure. Both state governments have earmarked some of the money raised to build new projects.

In a statement from promotional body Infrastructure Partnerships Australia, its chief executive Brendan Lyon said: “Queensland has been investing less in infrastructure because it cannot afford it. The lease of the grid is the infrastructure circuit breaker that Queensland needs.”