Western Power privatisation all pain and no gain

Independent analysis has revealed that the privatisation of Western Power would leave the state government worse off financially, each year.

The research was undertaken by ORION Consulting in the leadup to this week’s state budget, in which the Barnett Government is expected to announce its intention to sell or lease Western Power to the private sector.

Download the report here.

The research found that the $15 billion in potential proceeds flagged by Treasurer Mike Nahan was at the upper end of possible valuations, with a sale or lease value of $11 billion more likely.

The research noted that Western Power was carrying $7.2 billion in borrowings, which was a significant proportion of the Barnett Government’s total debt burden.  However, the research also found that Western Power was generating sufficient earnings to fully cover the interest on that debt.

Most strikingly, the research found that, after paying its own interest bill of $315 million in 2014/15, Western Power delivered an additional $515 million in financial benefits to the state government.  This was made up of dividends, taxes, retained earnings and a $136 million contribution to the tariff equalisation fund, which subsidises power prices in regional WA.

The report concluded that, even if the total proceeds from a sale or lease were used to retire state debt, the savings on interest wouldn’t be sufficient to offset the foregone financial benefits, and would leave the state budget worse off each year.  Depending on the sale / lease value, the state budget would be worse off by between $171 million ($15 billion proceeds) and $362 million ($11 billion proceeds) each year.

Electrical Trades Union WA (ETUWA) Branch Secretary Les McLaughlan called on the Barnett Government to abandon its privatisation plans.

“No matter which way you look at it, there is absolutely nothing to gain from the privatisation of Western Power,” Mr McLaughlan said.

“In addition to delivering pain to the community through higher prices, fewer jobs and reduced maintenance budgets, independent analysis has now found that privatisation would deliver no gain to the state budget.

“In fact, the privatisation of Western Power would leave the state budget worse off each year, with less money available to employ teachers, nurses, police and other vital public sector workers.

“If Barnett and Nahan push ahead with the privatisation of Western Power, it will be a situation of all pain and no gain – nobody will win.”

Australian Services Union WA (ASUWA) Branch Secretary Wayne Wood said privatisation would come at great cost to the community.

“With privatisation, the community always pays,” said Mr Wood.

“The number one priority of private companies is to maximise profits.  If Western Power is privatised, we would see a new private operator jack up prices, as well as cut jobs, apprenticeships and maintenance budgets in an effort to reduce costs.

“In Victoria, 173 people paid with their lives in the Black Saturday bushfires, where five of the worst blazes were caused by poorly maintained privatised power lines.  In our drying climate, this is the last thing we need in WA.

“The ASU and ETU joined forces in 2014 to campaign against the privatisation of WA’s electricity network, and we’re going to take this fight all the way to the 2017 election, and beyond, if we need to.”