THE QUEENSLAND Government has touted a win in its recent energy sales process, in which it grossed more than $3 billion. But it is the Government’s legal advisers on the deal who faced the biggest challenges in the short time limit they were handed to have it done.

Acting for the Government was Allens Arthur Robinson, whose partners John Greig and Grant Anderson had to help break up existing businesses and sell them off in “bite sizes” for people to buy.

“Queensland owned all the electricity and gas retailing businesses and they decided for the purposes of encouraging competition to sell off their interests in electricity retailing and gas retailing, which were held in a number of Government-owned corporations,” Greig told Lawyers Weekly.

That eventuated in four separate sales, including Allgas Energy, Sun Retail, Powerdirect Australia, and Sun Gas. Restricted by the Government’s short timeline on the deal, Greig and Anderson had to restructure the businesses and sell them off one by one.

“Those businesses didn’t exist in that form when we started the process. So one of the first things we had to do once the Government took advice from its financial advisers and its commercial advisers as to how to break it up, was to break up the businesses into those packages. So they were bite sizes for people to be able to buy them,” Greig said.

“This was consistent with the Government’s intention to sell them that way to enhance retail competition for the benefit of customers in Queensland.”

Much of the selling, however, was done before those businesses actually existed. “So when we put together the data and information running around and the sale agreements and so on, we had to describe to bidders businesses [that were not] as they exist today. They were describing the businesses as they would be by the time they actually got around to buying. So, for example, for Sun Retail and Sun Gas, those two sales were completed on 1 February this year but bids were being put in by November. In November those businesses didn’t exist like that at all,” said Greig, who is a partner in AAR’s infrastructure and energy practices, specialising also in water.

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Anderson said the firm essentially took a “blob of businesses” that resided in the two integrated distributors Energex and Ergon. The firm had to assist in creating the four businesses out of them, he said.

In order to create two retailers of the size that was necessary to enhance competition in the Queensland market, the legal advisers took some of the customers — about 390,000 of the non-contestable customers from Energex Limited — and effectively transferred them across into a newly created retailer.

The retailer also included some of the contestable customers. That business is being operated by the other Government-owned entity, Ergon Energy Corporation Limited, Anderson said.

While not a completely uncommon practice, legislation was specifically passed in the Queensland Parliament to enable the team to transfer assets and liabilities via a transfer notices. The Energy Assets Restructuring and Disposal Act went through parliament in 2006. “This also dealt with the effective transfer of contracts, which customers had with the retailers from one body to another,” Greig said.

He said another unusual feature of the transaction was that the legal advisers developed an allocation model, which was necessary to divide the energy and payments for the energy between those two retailers.

“The reason for that being we were actually taking one franchise area and dividing that in two, but without putting metering in place. [It meant] that we had to have some contractual arrangements in place that dealt with the allocation between those two retailers of energy — which was consumed by their customers,” Anderson said.

“That necessitated dealing with the operator of the national electricity market and also getting a letter from the Australian Energy Regulator so that we could actually put this model in place. That’s something that I’m not aware of having really being done before.”