Difficult Snowy float
July 28, 2008
Here is Stephen Mayne's story from the Crikey edition on Monday, 19 December, 2005.
19. Selling the Snowy won't be easy
By Stephen Mayne
Could the Victorian Government seize de facto control of the iconic Snowy Mountains Hydro-Electric Scheme through its 29% stake if the NSW Government goes ahead with plans to float its 58% on the market in the next six months? Or will the Federal Government attempt to increase its 13% stake and exercise more control over Australia's largest engineering project which took 100,000 people 25 years to complete.
NSW Premier Morris Iemma used the cover of the race riots to announce the controversial sell-off on Friday but given the resounding rejection of power privatisation plans in 1998, don't hold your breath. Check out The Australian's coverage here.
The Snowy Mountains Hydro-Electric Scheme is one of the world's biggest and most complex water supply/hydro electricity projects, so it comes with plenty of politics. It consists of seven power stations and a flowing river, with an overall capacity of 3756 MW. It saves 5.5 million tonnes of carbon dioxide annually and supplies 10% of NSW energy. But Greenpeace complains that in the process it has flooded a number of towns like Jindabyne and Adaminaby and has come close to destroying the ecosystem of the Snowy River.
The business generated revenue of $440 million last year and produced a pre-tax profit of $199 million, down from $215 million in 2003-04. A $100 million dividend was paid out, even though it is still saddled with more than $600 million in debt and even has a $60 million unfunded superannuation liability. Iemma reckons he can get $1 billion for his 58% stake even though the board claims it only has net assets of $1 billion. Check out the 2004-05 annual report here.
The directors of the SMHEC have been noted for their political connections. Costello supporter Michael Ronaldson took home the tidy $55,000 annual fee representing the Commonwealth in between departing his seat of Ballarat and re-entering the Senate this year, although he didn't appear to have any relevant skills.
The NSW Government appointed former ALP national secretary Bob Hogg last year and the Bracks Government appointed former ALP economics adviser Bruce Cohen, whose partner Kim McGrath has been on the staff of the Premier for many years.
Any public float will need a reconstructed board, especially given that chairman Robert Barry has been deputy chairman of AWB Ltd since 2000 and presumably did know or should have known something about the $300 million which our monopoly wheat exporter slipped to Saddam's regime.
All up, this will generate plenty of heat over coming months. After all, the Bracks Government only got into office promising to increase the flow from the Snowy River to independent Craig Ingram. This might explain its reluctance to sell at the moment, although it was certainly something that Jeff Kennett's former Treasurer Alan Stockdale wanted to do, but NSW would never play ball in days gone by.
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