The Iemma Government is unlikely to get the $15 billion windfall it is expecting from the sale of the state’s electricity assets because of billions in hedging losses incurred by generators over the last financial year, Shadow Minister for Finance Mike Baird said today.

“If the power sale does go ahead, there’s no doubt the private sector will take the generator’s $3.7 billion in hedging losses into account when determining a price,” Mr Baird said.

“Potentially hundreds of millions of dollars could be shaved off the value of the state’s electricity assets because the Iemma Government has not kept an eye on what its generators were doing,” he said.

The annual reports tabled in Parliament show Macquarie Generation had $1.7 billion in hedging losses for the 2006-07 financial year, Eraring Energy lost close to $900 million and Delta Electricity lost $1.05 billion.

Hedging contracts lock in electricity wholesale prices as protection against market volatility  and the annual reports of Macquarie Generation and Delta Energy show that 60-80% of its contracts are locked in a long-term profile, meaning they will be inherited by a future purchaser.

“Last week the Minister for Finance John Watkins refused to explain the hedging losses in Parliament despite the fact they were documented in the generator’s annual reports he signed off on. He also couldn’t assure the public that risk management practices were in place,” Mr Baird said.

“This week an FOI I lodged to obtain copies of the generator’s hedging policies was refused on the grounds it would lead to ‘unnecessary public debate’,” he said.

“We’re talking about billions in taxpayer funds. There should be public debate if state-owned companies are incurring significant losses.

“If the Labor Government doesn’t understand the financial situation of the companies it is planning to sell, then how can it negotiate a fair price?

“The Iemma Government is skilled at making big announcements but fails time and time again in the detail.

“The annual reports also reveal the Auditor-General is unable to give an endorsement of the generators, stating his review of Macquarie Generation ‘does not provide assurance about the effectiveness of its internal controls’,” Mr Baird said.

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