07/06/2018 - 10:21

Asset sales halted after 1990s flurry

07/06/2018 - 10:21

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BN 25th Anniversary series- WA has been slow to introduce private ownership to some state industries, although a series of moves during the Court era generated benefits, according to one prominent WA economist.

Western Power was disaggregated in 2006.

Public support for the sale of government assets has waned markedly over the past 20 years since multiple deals in the 1990s, according to the latest review in Business News's 25th Anniversary series.

A raft of privatisations were under consideration in the early days of the Court government, according to a Business News story from March 1994 (see photo below).

Readers with long memories will be aware of big sales such as Alinta Energy (see table above), R&I Bank (now Bankwest) and SGIO.

Smaller moves included State Print, while transport operator Stateships never made it into private hands; it was closed in 1995 with then premier, Richard Court, saying it had cost more than $160 million in subsidies over 10 years.

In financial services, Bankwest was converted from a lossmaker to be a profit-making enterprise under the leadership of Warwick Kent, and partially floated in 1995.

Probably the most complicated privatisation was that of the State Energy Commission Western Australia, which was broken up in December 1995 and now, more than two decades later, still remains partially in public hands.

SECWA, as it was then known, was split into Western Power, the electricity arm, and Alinta Gas, following the Carnegie Inquiry initiated by the Lawrence Labor government.

Alinta’s Dampier to Bunbury Natural Gas Pipeline was sold to Epic Energy for $2.3 billion in 1998, and the rest of the business was floated in 2000.

The distribution network was later spun-out and is now controlled by Atco.

Epic went into receivership in 2004, and the pipeline again came under the control of Alinta in a consortium with Alcoa, for a time at least.

One benefit of the process, however, has been the introduction of retail competition in the gas market, with providers such as Kleenheat, AGL Energy and Origin Energy pushing prices down as much as 35 per cent.

The electricity arm, Western Power was disaggregated in 2006, creating retailer Synergy, generator Verve Energy, regional business Horizon Power, and network manager Western Power.

The Barnett government went in the opposite direction, re-aggregating Synergy and Verve in 2014.

When a $3 billion plan to sell 51 per cent of the Western Power network was taken to the 2017 state election, the Liberal Party lost, suffering swings of 20 per cent in some seats.

Victoria and South Australia sold their electricity networks in the late 1990s, while the NSW network was sold in 2016.

Business News March 1994 edition. 

A range of other privatisations proposed in the Barnett years did not eventuate, although the sale of the Perth Market Authority, which runs Canning Vale markets, earned $150 million.

Moves to sell the TAB, Fremantle Ports, and the Utah Point berth at Port Hedland, have not materialised.

All other major Australian metropolitan ports have been privatised.

The McGowan Labor government has plans on the agenda.

The TAB sale is still progressing, a sale of Landgate is possible, and a deal partially privatising renewable energy has been secured.

ACIL Allen executive director WA & NT, John Nicolaou, told Business News the sale of the Dampier Bunbury Pipeline, Alinta Gas and Bankwest were examples of the benefits of privatisation.

Private businesses have a stronger incentive to run operations efficiently and had clearer objectives that were free from politicisation, Mr Nicolaou said.

As an example, gas transmission costs have barely changed since privatisation, he said.

“While there might be some examples where the merits might be questioned ... the experience with privatisation in Australia and WA can only be seen as positive,” Mr Nicolaou said.

A further benefit was that governments could release capital to use for essential services such as schools and hospitals.

Voters had perhaps been hit by reform fatigue, Mr Nicolaou said, with arguments including fear of job losses.

But more efficient operation of services would drive down costs and create many more jobs across the economy in the longer term, while leadership would be needed to continue to promote the benefits, he said.

Business News April 1994 edition. 

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