Private Sector Funding Proposal for Electricity Distribution and Transmission Businesses
- Grossed up to replicate franking credits
- Network businesses remain exempt from Federal
income tax thereby avoiding any tax inefficiency
Non–Share Equity Interest (NSEI)
The Government will undertake a market sounding to establish the private sectors interest in the Non-Share Equity Interest proposal.
A market sounding is a way to ensure the government receives the best advice on the potential for private sector investment as it considers options to prevent debt increasing further.
Results of the market sounding will be used by the government to assess the viability of the NSEI as an option for reducing the future call on government to fund infrastructure expansions.
Under this option the State retains 100 per cent ownership of the ordinary shares in the network businesses and assets. Private sector participation occurs through a hybrid security instrument, a Non–Share Equity Interest (NSEI).
The private sector contribution will equate to the net funding for the capital expenditure requirement and therefore represents new capital injections.
The NSEI security is debt in its legal form, but classified as equity for tax and accounting purposes and these characteristics give the security its "hybrid" form.
The returns on the NSEI are sculpted to reflect the holders proportionate interest in dividends and tax equivalents paid by the network businesses separately.
It is proposed that private sector debt will replace the existing QTC funding, on a non-recourse basis to the State.
Last reviewed 6 June 2014