The Greens are taking credit for the about face in the privatisation of the Snowy Hydro scheme, calling it a victory for democracy.
The planned sale of Snowy Hydro was dead in the water after the federal, NSW and Victorian governments all announced they would pull out of the process earlier today.
The change of mind was led by the federal government, with Prime Minister John Howard abandoning plans to sell Canberra's 13 per cent share of the iconic Australian power company.
Senator Brown is taking credit for the backflip, saying it was a legal opinion sought by the Greens that showed the sale would be illegal unless properly legislated.
"This is a Greens political victory, but above all, a victory for democracy," he said.
The Prime Minister's announcement early this morning, forced the hand of NSW Premier Morris Iemma.
The dramatic withdrawal
Following the government's about turn, Premier Iemma quickly said his government would pull out of selling its 58 per cent share.
Victoria then said it could not go ahead with the sale of its 29 per cent stake.
The dramatic turnaround follows an outpouring of public opposition to the sale which the NSW government, as majority shareholder, announced late last year.
Since then criticism has grown, with federal backbenchers pushing Mr Howard to at least keep Canberra's share in public hands.
Mr Howard conceded he underestimated the public's feelings on the issue.
"For whatever combination of reasons, there is overwhelming feeling in the community that the Snowy is an icon. It's part of the great saga of post-World War II development in Australia," he told reporters.
"It conjures many stories of tens of thousands of European migrants coming and blending with each other and in the process of working on the Snowy becoming part of this country. And people feel that.
"I have been surprised by the level of public disquiet. It's turned out to be much greater than I expected.
"I have listened to that, and it is important that on occasions a government have both the courage and the willingness to change its mind on something."
Mr Howard rejected any comparison between the government's handling of the Snowy sale and its plans to sell its majority shareholding in Telstra.
"There's a big difference," he said.
"There's a long term public benefit (to selling Telstra). It's the major telecommunications company in the nation.
"The Snowy has never been an election commitment.
An angry Mr Iemma said the federal pullout meant there was no point in NSW going ahead with its sale plans.
"The Commonwealth decision makes it extremely difficult for NSW to proceed."
He said Victoria would now face the same situation as NSW.
"It just makes it so difficult if not impossible to proceed with the sale."
Mr Iemma said the loss of an injection of capital funds from the planned sale would hinder Snowy Hydro's expansion plans and competitiveness.
"If Snowy Hydro Ltd does not invest interstate, its competitors will and Snowy Hydro will face increased competition and lose market share," he said.
"The NSW government still believes NSW taxpayers' funds should be spent in NSW, to build schools, hospitals and infrastructure. It should not be spent building power stations and in SA and Victoria."
Raising capital may be harder now
The abandonment of the $2.7 billion sale of the Snowy Hydro scheme by its government owners will send a bad signal to foreign investors, analysts say.
Stock Analysis analyst Peter Strachan said there was no good reason to abandon the sale and the federal government had made a mistake in bowing to political pressure.
"The loser is Australia because we become a laughing stock on the international stage," he said.
"What this shows is that the government is standing in the way of commerce.
"It's not like we are Bolivia or Venezuela where they are nationalising assets ... but it is a signal to foreign investors that the Australian government likes to tilt the playing field when it suits it."
Intersuisse analyst Peter Arden said the organisers of the deal had not recognised the seriousness of the hurdles the sale faced.
"It's been poorly handled," he said.
"It wasn't an ordinary situation - it had all these prickly things on the side that were always going to be issues and they had to be looked at."
Mr Arden said a key concern had been to ensure the privatised hydro electric scheme would guarantee water flows and stakeholders had not been convinced by the mechanisms put in place.
"There probably wasn't wide enough consultation beforehand, lining up all the interested parties and getting them all to sign off on a mechanism, rather than doing it at the last minute when the dollar signs started to appear," he said.
Snowy Hydro would now have to go back to trying to solve the problems its government ownership status had thrown up in the past.
The scheme needed cash to fund its planned expansion into Victoria with gas fired power stations, but the NSW government did not want to spend money that did not benefit its constituents.
Among the biggest losers from the abandonment of the IPO could be the financial institutions involved in organising the deal.
The lead marketers, Goldman Sachs JBWere (GSJBW), Macquarie Bank and UBS, have been running hard to promote the offer with a massive nationwide advertising campaign and an offer document expected later this month.
GSJBW would not comment on whether it would receive any break fees since the IPO had been canned and Macquarie and UBS were still deciding whether to comment.
ABN Amro and Deutsche Bank were co-leads on the deal.
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