Mike Baird is no longer premier of NSW but he should take a bow for his outstanding political leadership in relation to the sale of the state's electricity assets.
Two years after he went to an election with a policy to recycle the proceeds of asset sales into new infrastructure, the state has garnered gross assets of $34 billion.
During that election in March 2015, Baird had to deal with a treacherous and blatantly misleading campaign from Labor leader Luke Foley that electricity prices would rise under private ownership.
The gross proceeds of $34 billion turned into net proceeds of $23 billion after various payments were made including the repayment of debt. Most of the money has been churned back into large-scale infrastructure projects or committed to new projects.
In the process of selling leases over assets owned by Transgrid ($10 billion), Ausgrid ($16 billion) and Endeavour Energy ($7.6 billion), the state cemented its position as a world leader in asset disposals. Its electricity privatisation processes, which were on the advice of Deutsche Bank and UBS, have been talked about as a role model for the coming infrastructure investment phase in the United States.
Baird, who is now head of institutional banking at National Australia Bank, was fortunate that the timing of the sale of Transgrid, Ausgrid and Endeavour coincided with a boom in infrastructure investment.
Consortiums of global and domestic investors paid record prices for the assets as measured by the amount of money paid relative to the regulated asset bases (RAB).
Transgrid set a record of 1.66 times RAB, Ausgrid was 1.42 times RAB and Endeavour was in between at about 1.6 times RAB. Compare these multiples to listed electricity group Spark Infrastructure, which trades at 1.3 times RAB, and you realise how well NSW taxpayers have done.
The sales process for the NSW electricity distribution and transmission assets had its hiccups, not the least of which was Treasurer Scott Morrison's intervention to stop the first attempt to sell Ausgrid because of security concerns over entities from China and Hong Kong. At least there is now clarity about the minimum levels of Australian ownership in the sale of critical infrastructure.
Privatisation of electricity assets in Victoria and NSW has benefited consumers and taxpayers because the assets have been run more efficiently. Queensland's refusal to sell its electricity assets means that consumers and taxpayers will continue to pay for the inferior performance of these assets relative to NSW and Victoria.
