Australia state power sale plan set to collapse

SYDNEY (Reuters) - An Australian state's planned A$10 billion ($8.6 billion) sale of power assets was on the brink of collapse on Thursday after an influential bloc of lawmakers vowed to oppose the plan. The government of Australia's most populous state, New South Wales, wants to sell electricity assets to free up capital for investment in hospitals, schools and public transport, but the plan faces stiff opposition, both inside and outside government.

The plan has been closely watched by bankers as it was expected to be one of the biggest deals in Australia this year. The government is being advised by Credit Suisse and Lazard Carnegie Wylie.

The assets slated for sale include the retail arm of Energy Australia, considered a potential target for Origin Energy Ltd (ORG.AX), AGL Energy Ltd (AGK.AX) and Hong Kong utility CLP Holdings' (0002.HK) TRUEnergy unit.

The UK's International Power Plc IP.L had expressed interest in the state's generation assets, including Eraring Energy and Integral Energy.

With talk that up to 19 ruling party lawmakers may vote against the plan when it goes before state parliament later on Thursday, opposition MPs now look likely to determine the outcome.

But opposition leader Barry O'Farrell said his conservative Liberal Party, though normally supportive of privatization, would vote against the sale of power assets because they were unlikely to fetch a decent price given poor market conditions.

"Governments only get one opportunity to sell a public asset and, if they decide to sell, it's essential that taxpayers get the best possible price," O'Farrell said in a statement.

"That's not possible given the current uncertainty in the energy sector."

The statement was backed by the Liberal Party's smaller opposition ally, the National Party. Together, the two parties control more than a third of the state parliament's lower house.