Australia rejected bids for electricity network Ausgrid from Hong Kong billionaire Li Ka-
shing and State Grid Corp. of China, amid growing opposition to selling infrastructure assets to overseas investors.
Treasurer Scott Morrison said it would be contrary to national security to allow the offers to proceed in their current form and said the bidders, which he didn’t name, have been given a week to respond.
“Ausgrid’s footprint includes critical power and communication services provided to businesses and government,” Morrison told reporters in Brisbane yesterday. He said he’ll make a final decision after seeing any revised submissions.
The move is the latest sign that protectionism is on the rise in Australia, where Morrison earlier this year blocked the sale of the nation’s largest cattle rancher to a Chinese-led group. If government-owned State Grid’s bid is ultimately blocked, Australia risks straining ties with its most important trading partner.
Li’s Cheung Kong Infrastructure Holdings Ltd. and State Grid were the only two companies to make binding bids for 50.4 percent of Ausgrid last month, people familiar with the matter have said. The electricity distributor, which supplies 1.6 million homes in and around Sydney, is owned by the New South Wales state government and was expected to fetch more than AUD10 billion (USD7.7 billion).
State Grid didn’t respond to a request for comment yesterday. CKI said in a statement that Australia “must have reasons beyond the obvious” that led to today’s decision.
The prospects for Chinese suitors haven’t improved since the July 2 election saw a swag of protectionist independent or minor party lawmakers elected to the upper house Senate. The National Party, the junior partner in Prime Minister Malcolm Turnbull’s coalition, which has been a vocal critic of investment by Chinese state-owned companies, also now has a bigger voice in the government.
“There’s a lot of politics mixed up with this decision,’’ said Paul Williams, a political analyst at Griffith University. “The government is struggling to engage with the electorate and it’s looking to re-establish some political capital. A bit of economic nationalism never goes astray.’’
Morrison’s announcement comes as Australia balances the need for foreign investment to drive economic growth against mounting public opposition to sales of farmland, real estate and strategic infrastructure, particularly to Chinese investors.
Despite overseas capital being vital to Australia’s future expansion, the government is arguably making it harder for foreigners to invest. Last year, it tightened scrutiny of sales of farmland to Chinese, Japanese and Korean buyers. The government board that vets investments now includes a former spy chief.
When the Obama administration last year raised concerns that a Chinese company had bought a port in the northern city of Darwin, where U.S. Marines are based, Morrison beefed up oversight of the sale of state assets. He’s also blocked the sale of the S. Kidman & Co. cattle station.
Morrison stressed yesterday that the national security concerns posed by the Ausgrid sale were “not country-specific and relate to the transaction structure and the nature of the assets.”
State Grid, which distributes electricity to 1.1 billion people, is bidding for energy assets globally as President Xi Jinping seeks to overhaul the country’s bloated state-owned businesses. Bloomberg
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