REPORT OF PROCEEDINGS BEFORE SELECT COMMITTEE ON THE LEASING OF ELECTRICITY INFRASTRUCTURE INQUIRY INTO THE LEASING OF ELECTRICITY INFRASTRUCTURE ——— At Sydney on Monday 11 May 2015 The Committee met at 9.00 a.m. PRESENT Reverend the Hon. F. J. Nile (Chair) The Hon. R. Borsak Dr J. Kaye The Hon. D. J. Clarke The Hon. Dr P. Phelps The Hon. C. E. Cusack The Hon. P. T. Primrose The Hon. S. G. Farlow The Hon. A. Searle CHAIR: Welcome to the first hearing of the Select Committee inquiring into the leasing of electricity infrastructure. First, I acknowledge the Gadigal people, who are the traditional custodians of this land, and I pay respect to the elders past and present of the Eora nation and extend that respect to other Aboriginals who may be present. Today we will hear from the Premier, the Hon. Mike Baird, Mr Blair Comley, the Secretary of the Department of Premier and Cabinet and Mr Simon Draper, Deputy Secretary of the Department of Premier and Cabinet. The Committee will also take evidence from representatives of the Energy Supply Association of Australia, Infrastructure Partnerships Australia, Networks NSW and Infrastructure NSW. This afternoon the Committee will hear from representatives of UBS Australasia. There will also be hearings this Friday 15 May 2015 and next Monday 18 May 2015. I will make some brief comments about the procedures for today's hearing. The hearing is open to the public and is being broadcast live on the Parliament's website. A transcript of today's hearing will be placed on the Committee's website within the next day or two. In accordance with broadcasting guidelines, while members of the media may film or record Committee members and witnesses, people in the public gallery should not be the primary focus of any filming or photography. I also remind media representatives that they must take responsibility for what they publish about the Committee's proceedings. It is important to remember that parliamentary privilege does not apply to what witnesses may say outside of their evidence at this inquiry. I therefore urge witnesses to be careful about any comments they may make to the media or to others after they complete their evidence because such comments would not be protected by parliamentary privilege if another person decided to take an action for defamation. The guidelines for the broadcast of the proceedings are available from the secretariat. Media representatives who are not accredited to the Parliamentary Press Gallery should approach the secretariat and sign a copy of the broadcast guidelines. There may be some questions that witnesses could answer only if they had more time or certain documents to hand. In these circumstances, witnesses are advised that they can take a question on notice and provide an answer within three calendar days following receipt of the transcript. Witnesses are advised that any messages should be delivered to Committee members through the committee staff. Please turn off mobile phones or switch them to silent for the duration of the hearing. I welcome our first witnesses, Premier the Hon. Mike Baird, Mr Blair Comley and Mr Simon Draper. Thank you for your attendance. Mr Premier, as you know, you do not need to be sworn in because you have sworn an oath to your office as a member of Parliament. Mr Comely and Mr Draper, please state your names and position titles and either swear an oath or make an affirmation. LEASING OF ELECTRICITY INFRASTRUCTURE 1 MONDAY 11 MAY 2015 MIKE BAIRD, Premier, and Minister for Western Sydney: BLAIR COMLEY, Secretary, Department of Premier and Cabinet, and SIMON DRAPER, Deputy Secretary, Productivity and Sustainability, Department of Premier and Cabinet, affirmed and examined: CHAIR: Mr Premier, I understand that you have a PowerPoint presentation to make. I request that you keep it to no more than 30 minutes. After that, Committee members will ask questions for one hour, and that will be followed by the morning tea break. Mr MIKE BAIRD: Thank you Mr Chair and Committee members. This has been a longstanding issue for the people of this State. Indeed, over the past 20 years both sides of politics have known that this is something that needs to be done. The question is how we do it and, importantly, how we convey it to the people of this State. The Coalition went to the last election honestly outlining the proposal. We think there are significant benefits to this plan for the people of this State and we received a mandate to go ahead with it. We appreciate that you, Mr Chair, said there would be an inquiry and I welcome this opportunity again to put to you and to the people the benefits that come with this proposal. Before I take questions, I will outline some of the key elements of the transaction and some of the issues to give us a basis to work from and will again put the case that we have put now for close to a year since I announced that this is what the Government wants to do for the people of this State. Thank you for the chance to put this to the Committee. As we said, the basis for this proposal is quite simple. We want to undertake a raft of infrastructure projects which have not been done, which have been examined and which need to be done. This is the capacity to do it. The $20 billion in infrastructure funding will provide more than 120,000 jobs. That is based on independent economic modelling that has assumed that is the number of jobs that will come with the proposal. There will be downward pressure on pricing and the boost to the overall economy will be more $300 billion in just over 20 years. Importantly, the Government has adopted the recommendations made by Infrastructure NSW in determining the priorities as we allocate the money for that infrastructure. There will be a raft of projects in the metropolitan region. I will not run through them all individually, but members can see a significant boost to public transport. That was somewhat missed in the debate. There will be significant investment in public transport and an increase in the capacity of our rail network in particular. There will be significant investment in roads and also education, health, sports and culture and additional transport in terms of light rail and bus rapid transit. There will be significant investment across metropolitan areas. There are also significant regional benefits with an allocation of $6 billion. We will be addressing the regional road freight corridor to increase productivity. There will also be important safety measures for regional communities. There will be significant investment in education and health and country rail. The last issue, water security, is a very significant initiative that has been required for a long time. There is a pipeline and infrastructure to support water security across New South Wales. There will be a range of investments coming to regional New South Wales. The plan is quite compelling. The increase to the economy to 2035—that is, just under 20 years—is $300 billion. While that comes over time, the size of that lift is about 60 per cent of the current economy. The value of the economy has recently passed $500 billion. In addition, there will be better infrastructure, which attracts more people but also provides greater capacity and improved quality of life for those already living in both regional and metropolitan areas. The last point addresses average State revenues as the economy grows. We have had a consistent number for the past 13 or 14 years. Revenue will be about $4 billion more at the end of that period. As the economy grows, State revenue also grows. That was obviously discussed. CHAIR: Do you have a printout of this material? Mr MIKE BAIRD: We can make that available. Dr JOHN KAYE: Can we have that now? CHAIR: A copy will provided at the end of the presentation. LEASING OF ELECTRICITY INFRASTRUCTURE 2 MONDAY 11 MAY 2015 Mr MIKE BAIRD: Again, the cost of doing nothing is unacceptable. This has often been missed. What does congestion in the city mean? It means significant things for the economy. As members can see, in 2016 the cost is expected to be $6.5 billion. By the time we get to 2036 if we do nothing the problem gets worse and worse. There is an exponential impact and it will increase to just under $30 billion. It is a significant cost and drag on the economy. That does not take into account quality of life. As the population grows, if we are not investing in this infrastructure to relieve congestion there is also a significant increase in costs for the economy. Doing nothing is not acceptable. A number of benefits will accrue for the overall budget. Again, this was missed in the overall approach. There is also a significant boost in the reduction of net debt. The dark blue bar is the general government sector's net debt position. Then the total sector is the light blue bar. There is a significant reduction in total sector debt upon completion of the lease. Over time, we get down to complete elimination of general government sector net debt. In terms of the future position of the State's balance sheet, a significant debt reduction is obviously a big positive for the future. I will not spend too much time dealing with the transaction itself. However, it is important to understand it. There is a long-term lease at 49 per cent.