Major Asset Privatisations Commencing in Australia's Energy and Infrastructure Sectors
The Australian federal and state governments are embarking on major asset privatisation programs, with the first assets about to hit the market. The privatisation programs are being boosted by federal government incentives to state governments, which recycle the proceeds into infrastructure under an Asset Recycling Initiative, as well as the infrastructure needs of a growing Australian economy.
Many offshore operators and financiers are involved in exploring the opportunities, given the recent drop in value of the Australian dollar and the relative stability and growth prospects for the Australian economy.
State Government Asset Privatisations
On June 4, 2015, the New South Wales Parliament passed legislation to authorise the privatisation of its statewide electricity transmission network and two electricity distribution networks in Sydney. The total value of these assets is expected to be in the range of A$13 billion. Bidding and financing consortia are currently forming in anticipation of the sales kicking off in the next few months, with interest from Australian funds as well as US, Asian and European industry players and sovereign wealth funds.
The Victorian government has just announced the privatisation of the Port of Melbourne, with media reports indicating price expectations of A$5 billion for a long-term lease. Legislation has recently been passed by the Northern Territory Parliament that will lead to the sale of the Port of Darwin in Northern Australia. The Western Australian government has also announced the privatisation of two separate ports.
Federal Government Asset Privatisations Under Consideration
In 2014, the National Commission of Audit identified a number of federal government assets that may be suitable for privatisation. These included assets in the energy, transport, health, defence, communications, government services and postal sectors.
At present, four federal government businesses are the subject of scoping studies (hearing services, corporate registry, government communications network and government property). Upon completion of these studies, decisions will be made on whether they will be privatized.
It is anticipated that a number of additional assets will also be considered for privatisation in the medium term.
Federal Infrastructure Growth Package
The federal government intends to recycle the proceeds of privatisation into other specific infrastructure projects by the use of tax and other incentives for the states and industry. In its recent 2015–16 budget, it has also confirmed significant infrastructure spending in the period leading up to 2020, including:
A Western Sydney Infrastructure Plan, which will include design and construction of the A$2.4 billion Second Sydney International Airport project;
A A$5 billion Northern Australia Infrastructure Facility comprising grants and loans (in partnership with state governments) for the construction of ports, pipelines, electricity and water infrastructure to open up Australia's undeveloped northern frontier for business, particularly with other countries in the Indo-Pacific region;
Metropolitan road projects (including tunnels) and interstate highways with an estimated cost of A$50 billion to 2020;
Metropolitan rail transit projects and interstate rail projects with an expected cost of A$20 billion to A$30 billion;
Major new hospital construction and redevelopment projects with an expected cost of A$3 billion to A$5 billion; and
Social and defence infrastructure projects with an expected cost of A$2 billion to A$5 billion.
A number of these projects are expected to be undertaken as public–private partnerships.
Jones Day lawyers in Australia have acted on many privatisations and are well-placed to assist interested companies. For further information on the assets to be privatised or for more information on the status of the privatisation in Australia, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com/contactus/.
Tony J. Wassaf
Gregory K. Begaud
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