Western Power float to raise $3bn

The Barnett government is hoping to raise $3 billion by selling 51 per cent of Western Power to Australian investors, and will also use the privatisation deal to remove about $8 billion of debt from the state’s books.

Premier Colin Barnett confirmed the privatisation plan, by floating 51 per cent of the business on the ASX, at a press conference this morning.

The $3 billion of cash proceeds will go into an infrastructure fund for investment in schools and Tafe facilities, transport infrastructure, and improving the reliability of electricity supplies in country areas.

The government will retain a 49 per cent shareholding, with an estimated equity value of $2.9 billion.

The sale process will enable Western Power to refinance its $8 billion of debt, thus taking the debt off the government’s balance sheet.

Mr Barnett told journalists the float valuation was based on independent estimates and he believed it was fair.

“That’s the assessment that both the treasurer and Treasury have made and it’s based on very high prices and multiples paid for similar assets around Australia,” Mr Barnett said.

“That’s the advice and it could change, but it’s going to be a significant amount of money and the $11 billion estimate is probably fair.

“Western Power represents the largest component of state debt, so immediately after the transaction that will be paid off."

In the press conference this morning, the government appeared to portray $11 billion as being the proceeds of the 51 per cent float, resulting in misleading suggestions the business had an equity value of $20 billion.

Government sources have subsequently clarified that the estimated proceeds are extrapolated from estimates Western Power has an enterprise value (debt plus equity) of about $14 billion.

Commenting on the ASX float, Mr Barnett estimated 31 per cent of the business will be sold to super funds, with mum and dad investors buying 20 per cent.

He also spelled out plans to spend the cash proceeds.

“Of the $3 billion, roughly $1 billion will be allocated to (refurbishment of) schools and Tafes,” Mr Barnett said.

“Also, $1 billion will be allocated to transport – both public transport infrastructure and roads.

“Finally, about $150 million will be allocated to improving the reliability of electricity supplies at the so-called edge of grid.”

The outstanding $850 million is yet to be allocated.

Mr Barnett was joined this morning by Nationals WA leader Brendon Grylls and Treasurer Mike Nahan to announce the move, with the sale pencilled in for 2018-19.

The plan will be hotly debated in the lead up to the March state election, as Labor is staunchly opposed to privatisation.

Dr Nahan said there would be a high degree of continuity under the plan.

“This model will address any national security concerns about foreign ownership," he said in a statement.  

"Western Power will not be foreign owned or controlled.

“It will be business as usual for workers at Western Power as strict employee protections will be outlined as part of the float process.

“Western Power is a regulated monopoly, which means a number of independent regulators will continue to oversee the various parts of the business, including safety, reliability, prices and performance, regardless of who owns Western Power.  This will not change.” 

Opposition leader Mark McGowan has vowed to fight the Western Power privatisation plan.

“A McGowan Labor government will keep (Western Power) in public hands, where it belongs,” Mr McGowan said.

“We will fight this every step of the way on behalf of every Western Australian.

“Mums and dads already own Western Power. If it's sold, family power bills will go up, service quality will go down, and jobs will be lost. 

“Selling Western Power is not in the best interests of everyday Western Australians and does not make economic sense.”