25 May 2008

NSW Government sell off by IPO

Authors: Fiona Melville

The NSW Government is introducing a Bill (see www.nsw.gov.au/energy/) with a restrictive sale process (see clause 4 of the main Act and clause 3 of Schedule 1) which must mean that they have now decided the form of the sale process as follows: 1. the leasing of generator assets and sale by IPO of the generator business (holding the leased assets); and 2. the sale of the retail entities to the private sector in each case following the restructure of the SOC and conversion of the restructured SOC into a Corporations Act company. This does not appear to leave room for the bundling of retail and generator businesses which is what the earlier press reports initially indicated. There are restrictions on the generator IPO to 10% ownership by any one entity for at least 3 years and this may well mean that the management structure in those entities remain largely in place as there will be limited control in the hands of any one shareholding entity. It also looks as through the distribution assets could be transferred to a restructured SOC leaving the retail business in the name of the current SOC ie Integral Energy Australia and for that entity to then become a Corporations Act company as part of the sale process. This would have the advantage of leaving the trading business in the hands of the entity holding the financial services licence until the moment of sale to the private sector. The transfer of contracts, assets and liabilities from the SOC to a restructured SOC (if required) will be achieved by a vesting order so that change of control issues are minimised. The Act will create the Electricity Assets Ministerial Holding Corporation which will be the lessor of the Power Station leases. The proceeds of sale of the generating and retail businesses are to be transferred to the NSW Community Infrastructure (Intergenerational) Fund which can fund capital works only to the extent of any excess in the fund above a minimum balance which equates to the amount that would be needed to be invested at the long-run rate of return to generate the income equivalent to the dividend and tax equivalent income expected from the assets transferred. Contact for this Press Release Fiona Melville, Partner Johnson Winter & Slattery Phone. +61 (2) 8274 9538 Mobile. +61 417 454 633 E: fiona.melville@jws.com.au Fiona Melville is a specialist energy and resources lawyer. She advises participants in the electricity and gas sectors on project developments for cogeneration gas fired plant, the development of wind farms and distributed generation projects. In addition to advising on project development issues generally Fiona is well placed to advise in relation to energy purchase and trading contracts, energy regulatory issues, financial services issues and off-take arrangements for the Environmental Products (renewable energy certificates, New South Wales Greenhouse Gas Abatement Certificates, Queensland Gas Electricity Certificates and Green Power Rights). Fiona is a leader in the development of trading Environmental Products and has prepared the Environmental Products Section to the Australian Financial Markets Association's GTC Guide to Documents which includes the documentation required for trading Environmental Products under the ISDA Master Agreement published by the International Swaps and Derivatives Association Inc. Johnson Winter & Slattery firm details JWS is a national corporate law firm with 35 partners, and offices in Sydney, Melbourne, Adelaide and Perth. The firm represents major private and public sector business organisations in a number of specialist practice areas. The firm is resourced with a bias toward senior lawyers with exceptional legal and commercial expertise, ensuring timely decision-making and the delivery of superior legal services.

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