Federal report suggests $220 billion sell-off of ports, airports and infrastructure assets to fund future projects

The Port of Melbourne, Gladstone Port, Port Hedland Port, Darwin Port, the Great Barrier Reef Airport as well as numerous electricity and water infrastructure are among around $220 billion worth of assets state governments might consider selling to shore up its finances.

The sell-off is recommended in a new federal report called Australia's Public Infrastructure – Part of the Answer to Removing Infrastructure Deficit released today by Infrastructure Australia.

It lists what it calls “commercially viable, publicly owned assets” that could be sold to the private sector.

Infrastructure Australia says it has identified that more than $100 billion of commercial infrastructure assets on Australian government balance sheets including airports; roads; water services; ports; freight rail; and electricity generation, transmission and distribution with an “enterprise value range” of between $195 billion and $219 billion.

The most valuable assets are tied to electricity production, with the report listing up to $59 billion worth of “electricity distribution” assets and $48 billion in electricity generation and transmission assets.

Around $11 billion could be generated from the sale of ports and less than $1 billion from airport sales.

Assets that could be sold to private interests include Snowy Hydro; the three NSW energy distributors Ausgrid, Essential Energy and Endeavour Energy; water retailer Sydney Water; and ports in Newcastle, Gladstone, in Western Australia and Tasmania.

“Today, the costs to governments of operating and maintaining these assets often far outweigh the benefits to the community of retaining these assets in government ownership,” says national infrastructure coordinator Michael Deegan.

He says governments around Australia need to explore new methods of financing and developing the infrastructure needed to improve national productivity.

“If we are to build on and sustain the living standards of all Australians, governments need to recognise that they cannot bridge the current funding gap,” he says.

According to the report, many assets in the energy, ports, regional airports and freight rail sectors could be sold relatively quickly and under current policy settings. The report adds that these sectors have the most capacity to provide funding for new economic infrastructure.

The assets are likely to be targeted at super funds because of their steady yields, rather than offshore institutions and sovereign funds, following the recent political stoush over the sale of Cubbie Station, with the report acknowledging that "some members of the community have genuine concerns about the private sector owning or controlling infrastructure that has long been in public hands.

“Australia's superannuation industry is also well placed to purchase these assets - providing a real opportunity to achieve all the potential benefits of a sale while maintaining ownership of these assets across a broad cross-section of the community,” says Infrastructure Australia.

The sale of the assets would be used by the governments to fund highways, ports and other infrastructure projects, as taking on fresh debt to do so could put its Moody’s triple-A credit rating at further risk, following recent falls in commodity prices.

Recent successful asset sales that Infrastructure Australia says “have generated real community value include the recent refinancing of the Sydney Desalination Plant, which raised $2.3 billion, $300 million more than the cost of constructing the plant.

“After repaying the debt incurred in building the plant, the net proceeds from the refinancing have been provided to Restart NSW allowing government to fund the building of critical new infrastructure such as roads, hospitals and schools.”

Other successful sales listed in the report include Hobart Airport, which was sold to a consortium of Macquarie Bank and the Tasmanian Retirement Benefits Fund for $350.5 million.

“Press reports suggest the price was above expectations.  The high sale price was reportedly due in part to the potential of the large parcel of 570 hectares of land attached to the airport,” says the report.