It has been just over a year since the NSW Government passed the Electricity Generator Assets (Authorised Transactions) Act 2012 to facilitate the sale of the remaining State-owned electricity generation assets – with those assets already subject to GenTrader Agreements to be sold first to their respective GenTraders (i.e. Origin Energy and EnergyAustralia).
Origin Energy have now acquired the Eraring and Shoalhaven power stations for $50 million having previously paid the Government $609 million for the output of those generators under a GenTrader Agreement. Origin Energy will also receive $300 million in break costs as a result of the Government’s termination of the coal-supply agreement with the State-owned Cobbora mine negotiated under the GenTrader Agreement. The Government has also advised that while the Cobbora coal contracts with Macquarie Generation and Delta Electricity have also been terminated, no compensation will be required as those entities have alternative arrangements in place.
While there are rumours that some renewable assets may be sold next, the eventual sale of the other GenTrader generators – Mount Piper and Wallerawang power stations – to EnergyAustralia will nevertheless pave the way for the remaining assets and development sites to be sold. It has been reported that Macquarie Generation may be sold to an potential offshore consortium for up to $3 billion. However this appears to be at odds with the NSW Government’s earlier statement as to the sale process.
Although the timing for the next round of sales may still be uncertain, now is a good time to recap some of the current issues facing a prospective bidder for the generation assets of Macquarie Generation and Delta Coast.
That the ACCC is hoping for more players in this market is a positive sign for the potential investor so far as competition issues are concerned.
Other issues potential bidders will need to consider include, among other things, market projections of the price of electricity, FIRB approvals (if applicable), the remaining life of the generators, obtaining financing for a coal-fired power station and the nature of the coal supply arrangements that have been put in place.
The Government have previously indicated that it would announce whether or not it will privatise the State-owned electricity distribution assets (i.e. the poles and wires) prior to the next election scheduled. This may not be plain sailing, however, as at their state conference in June 2013, the NSW National Party unanimously voted against such a sale. More information with be forthcoming on future sales as we approach March 2015.
Please see McGushin, S. and Seeto, A. (2012) “NSW Electricity Privatisation – background and issues”.
 Origin Energy, ‘Origin to acquire Eraring Energy and enter into new fuel supply arrangements’ (Media Release, 1 July 2013).
 Durie, J. ‘Turning liabilities back into assets’, The Australian, 2 July 2013.
 Macdonald-Smith, A. ‘Regulator warns on power mergers’, Australian Financial Review, 25 May 2012.
 Foschia, L. ‘NSW Nationals party opposed to selling poles and wires’, ABC online, 17 June 2013.
The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.