The NSW government has offloaded half of state-owned utility Ausgrid, selling a 50.4 per cent share to a consortium of Australian pension funds for $16.189 billion.
NSW Premier Mike Baird and his Treasurer Gladys Berejiklian said on Thursday the decision had been made to accept the unsolicited offer, which was first proposed by Australian Super and IFM investors in late September.
The successful “all-Australian” bid followed the federal government’s rejection, in August, of bids from two Chinese companies, based on concerns about national security.
As ITK analyst David Leitch noted at the time, this appeared to be a new concern for the federal government, considering both companies – Hong Kong’s Cheung Kong Infrastructure (CKI) and State Grid China (SGC) – already owned significant stakes in key Australian energy assets in a number of Australian states.
(Leitch also noted that “CKI’s Australian assets have been the most efficiently run in the NEM, as judged by the AER. We have never heard any criticism of its interests in regard to national security. Jemena was recently allowed to win, a very out of the money, bid to build a pipe to bring gas from the Northern Territory to Eastern Australia.”)
Reportedly, the Chinese companies reportedly $13 billion for the share in Ausgrid.
But, as Leitch also wrote in August, Ausgrid’s value was liable to “swing by billions of dollars” depending on the outcome of the AER’s appeal to the Federal Court against a ruling by the Australian Competition Tribunal over its determinations on 2014-2019 regulated revenues.
In comments today, Leitch said the price the government got from the Australian consortium was in line with where regulated utilities trade on the ASX and in line with ITK’s expectations.
“However in our view we are pleased to see the NSW government getting out ahead of the outcome of the full Federal Court appeal by the AER against the ACT review of Ausgrid charges. That appeal is being heard in Sydney this week,” he said.
“The NSW government gets $8.7 billion of equity and is also released from $7.3 billion of debt. It retains a 49.6 per cent stake in the asset which we think will be sold at a later date.”
Baird, meanwhile, thinks it’s a great deal, and says it will deliver $6 billion in net proceeds after the government pays off a $10 billion debt.
“We know the market better than anyone on the planet in terms of what these assets are worth,” Baird said. “We’ve obviously relied on expert advice but importantly an independent transactions committee oversees this and determines ‘is this market value?’
“Well the view is this is an outstanding bid for the people of this state.
“(It is) another excellent result for the people of NSW after our successful $10.258 billion lease of TransGrid,” he said.
“Our poles and wires transactions are unlocking billions of dollars to fund new schools, hospitals, public transport and roads that will make a real difference to peoples’ lives.”
Berejiklian said she was “delighted” with the deal, in light of IFM and AustralianSuper’s “demonstrated track record in the management and long term investment in infrastructure assets.”