Buy back privatised utilities and infrastructure? What for? Why?

| March 16, 2015

Should state governments buy back privatised utilities and infrastructure? Max Thomas suggests to rather campaign for investing in state-owned renewable energy and other key infrastructure.

In Victoria and probably elsewhere, there are calls for the ‘buy-back’ of privatised utilities and infrastructure. The Kennett government raised about $23 billion by selling off Victoria’s gas and electricity assets. That reduced public debt to around $10 billion. However, the finance had been raised on favourable terms and was used for productive infrastructure. The debt has now reached about $30 billion again but there isn’t much left to sell.

What happened in the Latrobe Valley was devastating. I am no apologist for the Kennett government; it cost my family. But I would swear on oath that I was told by a former senior Labor cabinet member that they would have sold off the power assets too. Their objection was only to the way it was done by the Kennett government. I saw the same person say the opposite on ABC TV a few days later. The Greens policy for employment in The Valley relates to decommissioning and mine rehabilitation work. None of this warrants further comment except to say that the history of Latrobe Valley is full of ill-conceived political schemes devised by people who could see what was best for us – from a distance, of course.

With the possible exception of extreme peak demand, forecasting seems to indicate that power supply will exceed demand for some time to come. There have even been concerns that private electricity producers could walk away for financial reasons, leaving taxpayers to clear up. This doesn’t seem like the ideal time to rush out and buy back assets, especially with the AUD at its present value. Many assets have considerable liabilities attached. Do we really need to purchase old coal mines with run down assets, aging pipelines and associated works? At the Commonwealth level, there is the telecommunications ‘egg’ to unscramble, not to mention the maze of rail, ports and aviation infrastructure involving all three tiers of government.

Renewable energy sources are becoming more attractive, and new technology promises to deliver major efficiency improvements. The Greens’ policy is to close the Hazelwood Power Station, possibly by way of their position in the upper house. Are we seriously going to discuss resuming public ownership of near-redundant or obsolete utilities and assets? Having taken their hands off some of the key economic ‘levers’ and placed them in the hands of private interests, governments have unwittingly committed to a ‘transitional phase’ between fossil fuel dependency and renewables. However, that can be seen as an opportunity to avoid wasteful compensation and to further develop realistic alternatives. In this scenario, reliance on coal would diminish but remain available until it becomes uneconomic.

Returns on private infrastructure investment have been lucrative under various financial arrangements. Such arrangements can result in major cost overruns at the taxpayers’ expense due to foreign exchange or interest rate fluctuations and poor contract supervision etc. Australia has a superannuation pool valued at $1.4 trillion. Governments, banks and numerous species of sharks are circling around this pool. In the pre-Kennett era, governments raised funds for infrastructure works by bond issues. Global equity prices have been bouncing around for some time and appear to be defying gravity. I think most people would opt for stable, if slightly lower returns, if they could see long-term economic benefits for Australia. ‘Casino capitalism’ is no way to reconstruct a nation.

I suggest a campaign to pressure governments and those in control of our funds to facilitate investment in state-owned renewable energy and other key infrastructure. The scheme would also buy back assets deemed by an independent body of elected representatives to be economically viable, ethical, environmentally sustainable and capable of generating employment for the future. Individual super account holders would be free to switch as much of their funds into and out of bond options, based on performance, or as they saw fit.



  1. Alan Stevenson

    Alan Stevenson

    November 6, 2016 at 11:10 pm

    Clean Latrobe Valley energy?

    Much has been said about the Latrobe valley and the Hazelwood power station. Brown coal is a cheap, reliable energy source and therefore attractive to many people. However, the brown coal deposits are only a few hundred meters thick and act as an insulator over the geology beneath. This has, over time allowed the build up of a lot of heat which could be used to produce a clean, reliable energy for the production of electricity. We would not have to drill very deep for it and the basic units (steam turbines, etc) are already in place. Surely this would be the way to go. I am no geologist but other countries are producing power in this way to the technology is also there. Just a thought.

    • Max Thomas

      Max Thomas

      November 8, 2016 at 10:33 pm

      Hot rocks rock or maybe not?

      Yes, a lot has been written about the Latrobe Valley, much of it by people who barely know where it is. They pass through it on their way to somewhere else and expect the lights to be on when they arrive home. Brown coal is a good insulator but it's also difficult to 'see' through. There is potential for geothermal energy projects in the Latrobe Valley but the financial and environmental risks of exploration and development are considerable. My blog was essentially about potential ways of tapping into Australian financial resources and giving control to the owners instead of allowing the fund managers to continue playing the 'capitalist casino' on Wall Street and elsewhere. It will be interesting to observe the position taken on (more) exploratory drilling in the Latrobe Valley by the Victorian government who have imposed a ban on 'unconventional' gas exploration throughout this state. Ironic it would be if the same political forces who demanded the CSG ban were to insist on geothermal resource development, using similar technology. As I've written in another blog: In drilling for water, there is a risk of aquifers containing high water quality being connected to aquifers containing naturally-occurring toxic minerals and gases. The ban looks like a weak, lazy and politically expedient solution that will one day have to be replaced by rational, evidence-based decisions, case by case. It wouldn't be the first time a government has fallen into its own trap.