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Power station 'fire sale' bad deal for NSW taxpayers

Paul Lister - Monday, July 01, 2013

Unions have criticised today’s announcement of the sale of power generator Eraring Energy as a “fire sale” that fails to realise the true value of the asset for NSW taxpayers

Power industry unions said it was absurd to sell off the profit-making enterprise, which delivered almost $140 million in profits last year alone, for just $50 million.

The NSW Government was also criticised that the sale of Eraring Energy, which owns and operates the Eraring and Kangaroo Valley Power Stations, had occurred without a competitive market tender process to ensure the best price was achieved for taxpayers.

Unions NSW secretary Mark Lennon said Eraring Energy’s own annual report confirmed that the company was worth much more than the $50 million sale price.

“If you look at Eraring Energy’s 2012 annual report you will see that last year alone this company had underlying profits of $137.3 million, which is more than twice the sale value announced today by Treasurer Mike Baird,” Mr Lennon said.

“In addition, this company had a total asset book value of more than $1 billion, including $142 million just in land and equipment assets.

“On top of this measly sale price, the NSW Government will also be making an additional payment of $300 million to Origin Energy relating to the supply of subsidised coal, which means this deal is going to cost the people of NSW millions of dollars.”

Electrical Trades Union NSW secretary Steve Butler criticised the Government’s failure to undertake a competitive market tender process which would have seen buyers bidding against each other, instead negotiating with only one buyer.

“The O’Farrell Government has failed the simplest test to get the best value for money for NSW Taxpayers from this asset sale,” Mr Butler said.

“Treasurer Mike Baird chose to only hold talks with a single buyer for this asset rather than test the market and open the sale to a competitive tender which is likely to have delivered a better deal for taxpayers.

“In March this year the O’Farrell Government spent $200 million on upgrading the Eraring Power Station only to sell it today for $50 million, it doesn’t make sense.

“This is nothing more than a fire sale that does not represent value for the people of NSW.”

United Services Union general secretary Graeme Kelly said that the deal was a disgrace and that the sale should be aborted.

“Here we have the Treasurer practically handing a valuable asset over to the private sector without any transparency,” Mr Kelly said.

“Just weeks after the NSW National Party State Conference voted unanimously to oppose the privatisation of the NSW electricity network, the NSW Treasurer has performed a fire sale of a major electricity generation asset.

“The Government should not be selling any assets, let alone an essential service such as electricity generator, but if they do sell off an asset like this they have a responsibility to guarantee that NSW taxpayers are getting the best deal possible.

“Not only has the NSW Government sold this asset for well under its value, they will also forego future years of profits and dividends that have helped to fund other public services like our hospitals, schools and transport.

“The NSW Government has failed and that is why I believe this deal should be aborted all together or at the very least put out to market tender to ensure the best possible sale price is achieved.”

Full financial details for Eraring Energy can be found on page 40 & 41 in their annual report.