By Maggie Lu Yueyang
SYDNEY, Feb 4 (Reuters) – The sale of power firm Macquarie
Generation heralds the start of a busy year for Australian
privatisations, as strong demand for high-quality assets
coincides with tight government budgets and a need for major
infrastructure spending.
AGL Energy Ltd, Japan’s Marubeni Corp and
ERM Power Ltd are expected to submit final bids for New
South Wales (NSW) state’s largest power generator, due by
Wednesday, people familiar with the process said.
With a book value of about A$2 billion ($1.76 billion),
Macquarie Generation’s sale is being closely watched by other
state governments with billions of dollars worth of potential
deals up their sleeves.
“The other states are all watching to see how each other are
divesting, and whether there is a lot of appetite or whether
particular assets don’t seem to be that attractive,” said Robert
Clarke, a partner at law firm Corrs Chambers Westgarth who
focuses on infrastructure deals.
A banking source familiar with Australian infrastructure
sales said Macquarie Generation’s privatisation could stimulate
more deals. “There are obviously multiple bidders looking at
Macquarie, and that in itself will encourage Queensland and
potentially Western Australia to sell,” the source said.
Australia’s burgeoning population – which could more than
double to 48 million by 2061 according to official projections –
and the end of a mining investment boom are forcing governments
to look at everything from new railways to ports and utilities.
Industry forecasts show the infrastructure deficit could be
as high as A$700 billion, or up to 50 percent of GDP, over the
next four decades, so federal Treasurer Joe Hockey is
encouraging states to consider selling some of their old
silverware to fund the projects of the future.
“There is an enormous requirement for new infrastructure
investment and there is zero capacity in those states’ budgets
to be able to fund it,” said Brendan Lyon, chief executive of
Infrastructure Partnerships Australia.
With its two coal-fired plants accounting for about a
quarter of NSW’s generation capacity, bankers expect Macquarie
Generation to draw a final bid price of about A$1.5 billion.
The NSW government says some of the proceeds will go towards
an A$11.5 billion motorway scheme to ease traffic congestion in
Sydney’s sprawling western suburbs.
AUSTRALIA FOR SALE
The value of commercial infrastructure assets held by
Australian states and suitable for sale is over A$100 billion
and much of it could be privatised relatively quickly, according
to an analysis by federal government body Infrastructure
Australia.
Foreign and domestic investors have their chequebooks open,
thanks to the country’s stable economy and expectations of
steady returns.
“These are by-and-large very good, very well regulated core-
or core-plus assets,” Lyon said.
Last year, the NSW government sold the long-term leases on
two major ports – Port Botany and Port Kembla – to a consortium
led by Industry Funds Management for A$5.07 billion.
The state also has received multiple expressions of interest
for a 99-year lease to operate Port of Newcastle, the world’s
biggest coal export terminal, for an estimated A$700 million.
That deal is expected to be finalised by mid-2014, a NSW
Treasury spokeswoman said. Macquarie Infrastructure Fund and
Marubeni are among the potential bidders, Australian media
reported.
Further north, the Queensland state government has put its
Brisbane metropolitan area toll roads on sale, which might raise
more than A$4 billion.
Hastings Funds Management, CP2, Transurban Group
and IFM Investors are preparing their indicative bids, which are
due Friday, a source close to the deal said.
In Western Australia, Treasurer Troy Buswell last year said
assets in state-owned ports could be sold after the state
government lost its AAA credit rating due to climbing debt.
In addition to state assets, the federal government is
mulling the sale of Medibank Private, Australia’s biggest
private insurer, which could be worth up to A$4 billion.
Australia Post has also been tipped for possible
privatisation but it is politically sensitive and unlikely in
this term of government.
($1 = 1.1461 Australian dollars)
(Editing by Stephen Coates)
