Canadians only foreigners likely to show in Ausgrid contest

Ausgrid

A raft of Canadian funds are expected to be the only foreign groups lining up for a potential acquisition of NSW electricity distributor Ausgrid, ahead of a revised sale process run by Deutsche and UBS.

The Canadian Pension Plan Investment Board and Caisse de depot et placement du Quebec are believed to be the two foreign parties interested in buying a 99-year lease of a 50.4 per cent interest in Ausgrid.

CDPQ is being advised by the Royal Bank of Canada, while the likely advisers for CPPIB would be Morgan Stanley or Goldman Sachs.

However, Canada’s Borealis is also expected to be in the contest, sources say.

Australian Super, meanwhile, may become part of a newly forming consortium so far comprising IFM, Queensland Investment Corporation and Macquarie.

While bidders are yet to receive any assurance on the terms in which foreigners can participate in the sales process, it is understood China’s State Grid has abandoned any hope of an acquisition, while Hong Kong’s Cheung Kong Infrastructure is unlikely to participate.

It comes after both bidders were blocked from buying the asset in the last process after Treasurer Scott Morrison flagged concerns about an acquisition by the parties on the grounds of national security.

The thinking now is that the government may argue an investment by the Canadians can be justified because it is among the countries that form the so-called Five Eyes intelligence alliance that already share sensitive information.

The Five Eyes — often abbreviated as FVEY — includes Australia, New Zealand, Canada, the US and Britain and the countries are bound by the multilateral UKUSA Agreement, a treaty for joint co-operation in signals intelligence.

Funds from other countries in the alliance are understood to either have limited interest in an Ausgrid acquisition or don’t have the firepower to embark on such a deal.

Canadian funds have been active participants in privatisation processes for Australian state-owned assets in the past, with Canada seen as a strong ally on issues of national security.

With government officials from NSW preparing to embark on a roadshow offshore to drum up competitive interest in Ausgrid, it is thought the destination may be Canada alone. Ironically, many of the major Canadian pension funds that invest in Australia, such as CPPIB, have offices in Australia, yet it may be that officials from the state are planning to embark on more high-level talks.

The trigger for the roadshow is understood to be a move to prevent an Australian-only consortium lobbing a low ball offer for the asset, which attracted offers of around $10.3bn from the Chinese bidders in the last contest.

Proceeds from the sale will fund the construction of much needed infrastructure in NSW, such as the WestConnex transport project in Sydney.