Government should just sell Energex, Ergon & Powerlink

The Government’s interesting proposition for private sector participation in Energex, Ergon and Powerlink, which raises the bulk of the $30-35 billion under the Strong Choices plan, should be attractive to investors because the businesses have reasonably reliable revenue streams they can use to pay back investors. But, as John Quiggin has noted (If it looks like a debt, walks like a debt and quacks like a debt …), the private sector is essentially just loaning money to these companies, rather than genuinely investing in them. It is debt, dressed up as equity, so the Government has money to get other debt off its balance sheet. It’s a clever arrangement and will certainly give private investors an interest in the performance and profitability of the businesses, but it doesn’t give them any real influence over how the businesses are run, because the Government retains 100% ownership. The Strong Choices plan notes (p. 31):

Private sector management discipline resulting from the participation may result in operational efficiencies and more competitive electricity pricing

Given they’ve used the word “may” the Government doesn’t appear too confident private sector discipline will be instilled in the companies as a result of the private sector participation. As I’ve noted before, the Government should simply sell these businesses, because they’d be better run by private operators, and there is no rationale for Government ownership (Productivity Commission says no rationale for State ownership of Energex and Ergon).

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