Australian State Unveils $16 Billion Power-Asset Leasing Plan

Australia’s most populous state will lease all of TransGrid, the operator of its electricity transmission business, as part of a plan to raise A$20 billion ($16 billion) for new railways and roads.

New South Wales also will lease majority stakes in distributors Ausgrid and Endeavour Energy, Treasurer Andrew Constance said today in a statement. The state will consider an initial public offering for those two units if it decides that will result in a better deal, he said.

The government announced plans in June to lease almost half of the combined electricity assets known as the poles and wires should it win a mandate at an election due in March. The government today offered new details on how it plans to structure the transaction.

The steady returns offered by the regulated power assets could attract buyers such as State Grid Corp. of China, Morningstar Inc. said earlier this year.

“It’s an asset that’s going to attract considerable interest,” Constance told reporters today in Sydney. “We will see a lot of interest from pension funds to invest in our infrastructure. It’s very encouraging.”

The state in July hired UBS AG and Deutsche Bank AG to study a sale of the electricity assets. The state will leave the distribution business Essential Energy in public hands.

Local companies are also potential suitors, with Spark Infrastructure Group saying earlier this year it would be interested in bidding with a partner.

“We can either debt-burden our kids, increase taxes or we can look at our existing asset base, recycle the capital and invest in more productive infrastructure,” Constance said. “The government shouldn’t be running these things.”

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