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Power struggle -

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TRACY BOWDEN, PRESENTER: The NSW Government's fire sale of the state's electricity assets may prove
to be the final indignity for Premier Kristina Keneally, just two months out from an election
widely expected to end 16 years of Labor rule.

In the past week a parliamentary inquiry has revealed last month's sale could reap less than half a
billion dollars for the state - well below the $5.3 billion first trumpeted by the Government.

The inquiry is expected to decide later this week whether to have eight former board directors from
the state's two biggest power companies arrested and forced to give evidence on why they were so
alarmed by the sale they resigned en masse.

Deborah Cornwall reports.

QUESTIONER: I'm asking you to apply your mind to the question and answer the question that's put to

KRISTINA KENEALLY, NSW PREMIER: Thankyou, Mr Khan. I acknowledge that I underestimated the level of
interest in the committee.

QUESTIONER: Premier, that's not answering the question, with respect.

BARRY O'FARRELL, NSW OPPOSITION LEADER: This inquiry though is about getting to the bottom of that
stinking, steaming mess.

KRISTINA KENEALLY: My interest is to act in the best interests of the taxpayer. And I will not have
retention value or anything ...

???: You're a lying clown and you are a disgrace, an absolute disgrace.

SECURITY: Just remove that person.

DEBORAH CORNWALL, REPORTER: After 16 years in power, there's a certain unhinged quality to these
last dying days of Labor Government in NSW.

BARRY O'FARRELL: We're now just over a month before the Government goes formally into caretaker
mode. What keeps me awake at night is the damage that Kristina Keneally and Eric Roozendaal can
still do to the state before they go into a period where they're no longer able to make the sorts
of crazy, incompetent and misdirected decisions we've seen in recent times.

DEBORAH CORNWALL: The desperate midnight scramble to sell off the state's multi-billion electricity
assets last month at fire sale prices has been universally condemned as a monumental blunder.

TONY HARRIS, FMR NSW AUDITOR GENERAL: The scheme is fundamentally a corrupted scheme. And, it's not
second best or third best. It's so bad that if Parliament were sitting today, I think you would see
the deal stymied and stopped.

DEBORAH CORNWALL: The sale so alarmed eight board directors of the two state power companies sold
off in the deal they resigned en masse last month, but those same directors now face the prospect
of being arrested and forced to appear at a parliamentary inquiry into the sale after refusing to
give evidence without legal indemnity.

TONY MAHER, FMR DIRECOTR, ERARING ENERGY: Well, it's out of control. It is ludicrous. I mean,
nobody in the history of the NSW Government has been compelled to answer without legal immunity.

DEBORAH CORNWALL: In fact none of the witnesses appearing before the inquiry into the sale have any
of the usual protections of parliamentary privilege. The result of the Premier's decision to shut
down Parliament just one day after the sale went ahead. It appeared a deliberate attempt to gag the
critics, but the Premier insists it was just bad judgement.

KRISTINA KENEALLY: I acknowledge that I made a mistake in underestimating the level of public
interest in this transaction and the need for scrutiny prior to the state election. Now, anyone can
make a mistake.

DEBORAH CORNWALL: That mistake has led to a standoff between the Premier and the inquiry.

QUESTIONER II: Will you not provide them with an indemnity?

KRISTINA KENEALLY: No, I won't, because I won't put the ...

QUESTIONER II: Because you've got a lot to hide, haven't you?

DEBORAH CORNWALL: But hasn't stopped the inquiry revealing profits from the sale, maybe as little
as $340 million, just a fraction of the $5.3 billion first trumpeted by the Government.

MICHAEL SCHUR, NSW TREASURY SECRETARY: Because it does leave the state with residual risks. But
they're not new risks.

QUESTIONER III: It doesn't de-risk the state.

DEBORAH CORNWALL: Under pressure, even the Treasury Secretary Michael Schur conceded there were
serious flaws in the Government's so-called Gen Trader model.

MICHAEL SCHUR: The Gen Trader option is the next best option available to the state.

DEBORAH CORNWALL: It's the same model that was rejected by Cabinet as a dud under Premier Morris
Iemma two years ago, just before Iemma was drummed out of the premiership by faction warlords after
his own energy privatisation plan was blocked by the Parliament. The plan, which would have reaped
the state $15 billion, critical funds for the state's long-neglected infrastructure, in particular
Sydney's congested roads and crumbling public transport system.

ANDREW CLENNELL, STATE POLITICAL EDITOR, DAILY TELEGRAPH: It's burning the villages on the way out.
It's a scorched earth policy. They didn't want Barry O'Farrell to come in in a position where he
could sell the electricity assets for $15 billion; then to have all that money to spend to keep
himself in office for 12 years. They wanted to trash it. I mean, they deny it absolutely, but the
NSW Labor right machine is the most ruthless political machine in the country without a doubt.

BRENDAN LYON, INFRASTRUCTURE PARTNERSHIPS AUSTRALIA: We had a generational opportunity to start to
deal with the many shortfalls in infrastructure right across NSW. I think that opportunity has been
squandered because we got the model wrong and because the Government pursued it with reckless
abandon to get it done.

DEBORAH CORNWALL: The State Treasurer spent the past week manfully defending the sale with
whiteboards and flow charts.

ERIC ROOZENDAAL, NSW TREASURER: We took the advice at the time under the circumstances some two
years ago it was the best option available to the Government to undertake energy reform to protect
the people of NSW from having to fund future power stations, to project the state's triple A credit
rating. It was the best available option that we had.

DEBORAH CORNWALL: Even if this deal had some merit, voters aren't listening. The latest poll shows
a complete wipe-out for Labor in the March election. If they're lucky, they'll hold on to just 20
seats, but at this stage it's looking more like 13.

The Opposition has promised to do what it can to unscramble the sale once in government. But while
Liberal Leader Barry O'Farrell may well be the new big, white hope of the side, he'll also have to
live with the fact that it was the Opposition that actually stopped Premier Iemma's energy reforms
going ahead in 2008.

ANDREW CLENNELL: No-one is going come out of this with clean hands. The situation in NSW now is a
government in waiting. No-one cares what Kristina Keneally says she's going to do. Such is the
feeling that this is going to be a massive victory to the Liberal Party.

TRACY BOWDEN: Deborah Cornwall with that report.