In early August the Victorian government sold the coal-fired Hazelwood Power Station for A$2.4bn to a syndicate headed by the UK's National Power. The high price paid for the station, which is around 30 years old and which operated at little over half its capacity during 1995, is essentially a high-stakes bet that Australia's long-awaited national power grid will be implemented within two to three years. Hazelwood is a base-load station, designed to operate at around 90% of capacity. This level of utilisation will only be possible once the national power grid starts up and Victoria is able to sell its excess power in other states. Once the national grid materialises, Hazelwood's low marginal cost of product will make it well- placed to compete with other generators. Although the official start-up date for the national power grid is October 1997, numerous delays leave the timing open to question.
At current production and earnings levels, the price paid for Hazelwood is around 30 times its earnings before interest and tax (EBIT). Once the station is able to operate at or near 90% of capacity, the multiple will fall to a more acceptable, but still high, ten times EBIT.
Shortly after the sale of Hazelwood, the Victorian government announced that it planned to sell the state's five remaining power generating businesses within two years. These comprise the Loy Yang A power station and brown coal mine; the gas-fired Newport and Jeeralang stations; a group of hydroelectricity plants; the state government's 49% stake in the Loy Yang B power station; and its 29% share in the Snowy Mountains Hydroelectric scheme. However, more recently, the Victorian treasurer, Alan Stockdale, indicated that no other major privatisations were planned for the remainder of 1996.
--and Queensland may sell off assets
An audit of Queensland's finances, chaired by Vince FitzGerald, pointed to a rising deficit and recommended sales of a range of state assets and higher state taxes. The government-owned assets listed in the audit report include power generators and distributors, motorway companies, port authorities, gaming operators, tourist agencies, forestry operations and surplus Crown land. The report approved of the government's moves to form a banking and insurance group by merging the Metway Bank with the state-owned Suncorp and Queensland Development Authority, provided that the new entity was then privatised.