NSW banks billions and sidesteps China security concerns by leasing electricity grid poles and wires

Ian Waldie/Getty Images

The NSW Government has just unlocked $10.258 billion to spend on infrastructure projects by leasing a key asset, its electricity transmission network, TransGrid.

The 99-year lease has gone to an Australian-led international consortium including a Canadian pension fund and interests in Abu Dhabi and Kuwait.

The tender for TransGrid, which has 12,900km of high voltage transmission lines, gained international attention.

One of the leading bidders was the Chinese government’s State Grid in partnership with Macquarie Infrastructure. The decision to lease Darwin’s commercial port to a Chinese company with links to the People’s Liberation Army has raised concerns about security when Australian infrastructure are controlled by foreign entities.

Leasing the biggest part of Australia’s electricity grid to a China consortium would have brought with it comment on the political as well as national security risks. However, all four final tenders received backing from the Foreign Investment Review Board last week.

The winner, NSW Electricity Networks, is made up of Caisse de dépôt et placement du Québec (CDPQ), a Canadian pension fund (24.99%), Hastings Funds Management, as manager of Utilities Trust of Australia (20.02%), Tawreed Investments Limited, the global direct infrastructure investment vehicle of the Abu Dhabi Investment Authority (19.99%), Wren House Infrastructure, a wholly owned subsidiary of the Kuwait Investment Authority (19.99%), and Spark Infrastructure, an ASX listed owner of energy infrastructure and Australian infrastructure manager (15.01%).

“This is a great result for NSW taxpayers and shows the comprehensive plan we took to the election is the right one for the future of NSW,” Premier Mike Baird said.

“We’ve taken a giant step in spending taxpayers’ money more wisely on things that make a difference to their daily lives like better schools, hospitals, public transport and roads.”

The deal will deliver gross proceeds of $10.258 billion which will be used to fund a raft of infrastructure projects as part of the state government’s Rebuilding NSW plan.

Price commissioner Allan Fels signed-off on the TransGrid transaction.

The successful consortium has also signed the Electricity Price Guarantee, which confirms total network charges will be lower in 2019 than in 2014.

TransGrid will also continue to be regulated by the Australian Energy Regulator which decides network charges.

The NSW Government is now going ahead with the part lease of Ausgrid, which provides power to 1.6 million homes and businesses. This is expected to be done by mid-2016.

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