New | NSW power assets may lure Hong Kong and mainland Chinese bidders

The planned privatisation of electricity transmission operations in Australia's New South Wales state will present an opportunity for Hong Kong and mainland Chinese power firms to increase their exposure to the regulated sector in the country if the government is re-elected, analysts and deal advisers say.

The potential privatisation, involving assets worth about A$26 billion in the form of 99-year leases, could attract Hong Kong companies such as Power Assets Holdings and Cheung Kong Infrastructure Holdings, which are seeking energy assets that generate secure returns in regulated markets.

"Going into 2015, the most significant deal should be the potential privatisation of power transmission and distribution assets in [New South Wales]," Dave Dai, Credit Suisse's regional head of utilities research, said in a report this month on acquisitions by Hong Kong's utilities firms.

The privatisation could interest mainland China's state-owned regional power grid monopolies as well, with State Grid Corp gaining the opportunity to expand its portfolio of Australian assets and China Southern Power Grid to enter a new market. A winning bid could also allow them to gain experience in deregulated power markets ahead of Beijing's expected deregulation.

"The state-owned power grid firms are potential bidders in the planned privatisation of New South Wales' transmission and distribution assets if the Baird government is re-elected, given their desire to expand and seek better returns overseas and gain experience in deregulated power market operations," said Hu Xinmin, a senior manager at power-sector consultancy Lantau Group, who knows both the Chinese and Australian power sectors well.

New South Wales' premier Mike Baird has said his Liberal-National coalition will proceed with the privatisation, which could free up A$20 billion for much-needed infrastructure like railways and roads, if it wins the March 28 election.