The Turnbull government has agreed to buy stakes held by New South Wales and Victoria in the Snowy Hydro project for more than $6bn. The agreement, clinched late on Thursday by Malcolm Turnbull, makes the commonwealth the sole owner of the project.
It allows the federal government to proceed with its $4.5bn plan to expand Snowy Hydro’s generation capacity by 50%, to benefit the east coast electricity grid.
“The historic agreement will generate more reliable energy, cheaper electricity, better infrastructure and more jobs for NSW and Victoria,” the prime minister said on Thursday night.
The commonwealth will increase its shareholding from 13% to 100% by buying NSW’s (58%) and Victoria’s (29%) shareholdings. The three governments agreed the fair market value of the enterprise was $7.8bn. After allowing for Snowy Hydro’s debt as of 31 December, NSW will receive $4.15bn and Victoria $2.08bn.
NSW and Victoria must spend the proceeds on “productive infrastructure” in their own states, such as road and rail projects that will boost their economies. The NSW government will also provide “all reasonable assistance” to Snowy Hydro in relation to its current and future operations, including the planning and approvals process.
The deal still has to be ticked off by the Victorian and federal parliaments.
Snowy Hydro is a critical player within the National Electricity Market – the electricity transmission network that covers Australia’s eastern and southern states.
The company owns and operates 5,500 megawatts of generation capacity, including the Snowy Mountains Scheme. The plan to expand thescheme’s capacity – dubbed Snowy 2.0 by the government – will provide an additional generation capacity of 2,000MW. It will power an additional 500,000 homes at peak demand.
The Turnbull government is keen for the public to understand that the project will be wholly owned by the government.
“The purchase will see this iconic infrastructure remain in Australian government hands and NSW and Victoria will receive a fair market value for an important energy asset,” Turnbull said.
“The deal will be contingent on the Victorian parliament confirming the sale and the commonwealth parliament passing an appropriation bill.”
The NSW premier, Gladys Berejiklian, vowed to spend the money outside the cities. “This will create an investment bonanza in regional NSW, with every cent of the proceeds going to rural and regional NSW,” she said.
“Not only have we unlocked billions for infrastructure in the regions, but it paves the way for the nation-building Snowy 2.0 project.”
The federal energy minister, Josh Frydenberg, said the money could go to rail, roads and bridges. He insisted the deal would guarantee Snowy Hydro stayed in public hands.
“Nobody can bind future governments but I don’t think it’s in the interests of any future governments, whatever their political persuasion, to do anything but keep this in public hands,” he told ABC radio on Friday. “It’s an iconic Australian asset.”
• Australian Associated Press contributed to this report