Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I move:

That, for the purposes of subsection 7(3) of the Snowy Hydro Corporatisation Act 1997, the Senate approves the transfer or disposal of the Commonwealth shares in the Snowy Hydro Company (incorporated under the name Snowy Hydro Limited) that will occur as a result of the Commonwealth participating in the Initial Public Offer process announced by the New South Wales Government on 16 December 2005.

As senators are aware, Snowy Hydro Ltd is the company that owns and operates the Snowy Mountains Scheme. The New South Wales government owns the majority of the company with a 58 per cent stake, the Victorian government owns 29 per cent, and the Australian government has the residual 13 per cent stake in that company.

On 16 December last year, the New South Wales Premier announced that the New South Wales government would sell its majority stake in Snowy Hydro and that the public would be given the chance to invest in the Snowy Mountains Scheme through an initial public offer on the Australian Stock Exchange. On 7 February this year, following careful consideration by our government of the implications of the New South Wales decision, the Minister for Industry, Tourism and Resources and I, as the ministerial shareholders for the Commonwealth stake, announced the Australian government’s intention to join the New South Wales government in offering its minority stake in Snowy Hydro to the market. The Victorian government has since announced that it too will participate and sell all its shares in the company.

Section 7 of the Snowy Hydro Corporatisation Act 1997 provides for the Commonwealth to dispose of or deal with its shares in Snowy Hydro. Where this reduces the Commonwealth’s shareholding in the company below the 13 per cent initially issued to the Commonwealth at corporatisation in 2002, the section requires the approval of the parliament to be obtained. The IPO process announced and led by the New South Wales government is expected to be completed by the end of June 2006. Accordingly, motions seeking resolutions in favour of the transfer or disposal of the entire Commonwealth holding have been tabled in each house at the earliest practical opportunity.

The sale of the Commonwealth’s minority shareholding is, in our view, in the interests of Australian taxpayers and consistent with our government’s strong support for the privatisation of government owned electricity generators and increased competition in the national electricity market. Under our government, electricity generation capacity has increased by 10 per cent, and all the eastern states are now interconnected. In addition, average retail electricity prices fell by 14.6 per cent in real terms between 1994-95 and 2003-04 and continue to be the second lowest in the developed world.

Energy reforms, including the sale of government owned electricity companies, have contributed to maintaining and improving the competitiveness of Australian industry as a whole. Independent analysis has found that the reforms have contributed $1.5 billion per annum to the Australian economy. So the floating of Snowy Hydro as an electricity company will give this company the opportunity to grow its energy business and raise capital in the future unconstrained by government ownership. Among other things, this completes the reform of Snowy Hydro governance started by the corporatisation of the company in 2002, in which all governments participated, and provides the best opportunity for Snowy Hydro to optimise the operational benefits of the Snowy scheme’s unique assets and maintain its competitive edge in the electricity market in the decades ahead. The sale also reinforces the separation of regulation and ownership and removes the potential conflict of interest from the New South Wales government currently owning energy companies that compete with and are customers of Snowy Hydro.

Importantly, the sale of the company will not change in any way the strict and rigorous rules underpinned by intergovernmental agreements which secure the water of the Snowy catchment for downstream use by irrigators and also for the environment. The strict regulatory framework was entered into by governments as part of the corporatisation of the scheme in 2002 on the basis that it would continue to apply in full irrespective of who owned the shares in the Snowy Hydro Ltd company. While Snowy Hydro owns the physical assets such as power stations and dams that comprise the scheme, it does not own the water it collects and releases from the scheme. The Snowy water licence administered by the New South Wales government in accordance with its contractual obligations with other governments gives the company the right to collect, divert, store and release water. In return for those rights the Snowy water licence imposes on Snowy Hydro the obligation to release specified volumes of water into each of the Murray and Murrumbidgee rivers every year for the next 72 years. The licence also requires Snowy Hydro to make the environmental releases for the Snowy, Murray and other rivers agreed to by the Australian, New South Wales and Victorian governments in relation to the corporatisation of the scheme in 2002.

I do want to emphasise that except for the releases designated under the regulatory regime for the Snowy River below Jindabyne, and subject to evaporation and similar unavoidable losses, all the water collected by the Snowy scheme is ultimately released into the Murray and Murrumbidgee systems after most of it has been employed to generate clean and renewable energy. The Australian government has explicitly acknowledged the importance of clarity with respect to arrangements for the timing of water releases made from the Snowy scheme into the Murray-Darling Basin Commission storages used to regulate river flows for irrigation and for the environment. In this respect I understand that Snowy Hydro and the commission are developing a data exchange agreement and are actively working towards improving other mechanisms related to the sharing of information that will assist in the efficient operation of the storages.

The government anticipates that buyers of Snowy Hydro shares will include Australian superannuation investment funds, individual Australian mum and dad investors and, I think very importantly, Snowy Hydro’s current and many past employees who can now have a stake in this company. The floating and subsequent trading of Snowy Hydro shares will, as is the case with any other Australian companies, be subject to regulatory oversight by the Australian Securities and Investments Commission, the Australian Competition and Consumer Commission and the Foreign Investment Review Board. With the exception of superannuation, the sale of Snowy Hydro is not expected to change the employment arrangements for staff. The company will of course remain focused on the Snowy Mountains and Cooma and it is required to keep its head office in Cooma and that is where its core business assets and employee base are located.

In relation to superannuation arrangements, staff would cease to be eligible to contribute to the Commonwealth superannuation schemes consistent with the longstanding government policy that predates our government, that when a government body is privatised contributory membership of these schemes will cease. Members of the schemes are entitled to the benefits provided by the schemes in this situation and I understand that the company is well advanced in making available suitable replacement arrangements for employee superannuation.

As I said, the New South Wales government is leading the joint sale process as the majority shareholder. As the minister responsible for the sale for the Commonwealth I am pleased to report a very high level of cooperation among the Australian, Victorian and New South Wales governments in this process. I should also mention the very strong interest by the member for Eden-Monaro, Mr Gary Nairn, in ensuring access to the lakes that comprise the scheme for both boating and fishing, and we have been working with the member for Eden-Monaro to ensure that that remains the case. We have sought legal advice on that matter to ensure that the public can continue to have access to these significant water bodies and at this stage we are confident that that access is assured.

In conclusion, selling Snowy Hydro through this initial public offering, a process instigated by the New South Wales government but which the Victorian and Commonwealth governments have joined, will allow the company to reach its full potential as a responsible provider of clean energy and water flows for both irrigation and the environment. I commend this motion to the Senate.