New South Wales Dumps Plan to Sell Electricity Assets

By Gemma Daley

Aug. 28 (Bloomberg) -- The government of New South Wales, Australia's most populous state, dumped plans to sell its electricity-retailing and power-generation assets, which the state estimated would have raised A$10 billion ($8.7 billion).

The government shelved the plan because it would have lost a parliamentary vote, Treasurer Michael Costa's spokesman, Brad Schmitt, said today. Unions had opposed the sale.

New South Wales Premier Morris Iemma vowed last week to recall the state's parliament to vote on the plan. The recall followed a report from the auditor-general saying the asset-sale plan shouldn't be delayed.

``The government didn't have the numbers to pass the legislation, so it would have been futile,'' Schmitt said in a phone interview from Sydney. A mini budget will be handed down within the next 10 weeks after the failure of the sale, he said.

Following the cancellation, the state and its treasury had their credit ratings cut to negative outlook by Standard & Poors.

The government in June proposed starting the sale process with Energy Australia's retail operations by the end of this year.

That would have been followed next year by the sale of the retail arm of Country Energy and the long-term lease of the Macquarie Generation and Delta Electricity power plants, then by an initial share offer in a company that combined the retail operations of Integral Energy with power producer Eraring Energy by the end of 2009.

Finances

The sales ``would have strengthened the state's finances over the short term and would have increased the state's expenditure flexibility,'' S&P said today in an e-mail.

The state's premier said as recently as yesterday that he was confident the sale would pass in parliament.

``It makes no sense with a national electricity market for New South Wales to be a fortress,'' Iemma said in a Bloomberg Television interview. The sale ``will free up billions of dollars of taxpayer's money that we can invest in more and better infrastructure and hence make Sydney and New South Wales more attractive for overseas investment.''

Credit Suisse Group and Lazard Carnegie Wylie were advising the government on the sale.

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net