Ausgrid: Morrison says Chinese bids not in national interest
The preliminary decision to reject the Chinese proposals for the NSW network is made on national interest grounds.
The Turnbull government has made a preliminary decision to reject the Chinese bids for a 99-year lease of Australia’s most valuable electricity network, Ausgrid, saying the proposals weren’t in the national interest.
The move forced NSW Treasurer Gladys Berejiklian to reassure the state this afternoon that the Baird government’s $20 billion infrastructure plan would remain on track.
Scott Morrison has told China’s state-owned State Grid and Cheung Kong Infrastructure Holding, a Hong Kong company controlled by billionaire Li Ka-shing, their foreign investment proposals for the NSW power distribution network were “contrary to the national interest”.
“Following careful consideration and consistent with the formal process required, I have today informed the bidders for the lease of 50.4 per cent of Ausgrid … that my preliminary view is that the foreign investment proposals put to me for this transaction are contrary to the national interest, in accordance with the required provision on the grounds of national security,” the Treasurer said.
“I have invited the bidders to make submissions to me by 18 August 2016 in order to make a final decision after that time.”
Mr Morrison said the “extensive” review process had uncovered “national security issues” in “critical power and communications services” provided by Ausgrid to businesses and governments.
“I am, of course, open to consider what the bidders put to me, but at this stage no suitable mitigations have been identified that would, for the proposed transaction structure, appropriately address the identified risks,” he said. “As Treasurer I consider each foreign investment proposal on its merits.”
The deal would be worth more than $10 billion and the possibility of both Chinese companies being knocked out of the race could set up the federal Liberal Party for a battle with the Baird government, which fought last year’s NSW election on its promise to use the sale proceeds to fund the biggest infrastructure building program since the Sydney Olympics in 2000.
Ms Berejiklian said today the infrastructure plan would stay on track despite the developments.
“We can assure the people of NSW that regardless of how the process plays out, there will be no delays to our infrastructure pipeline and that we remain well on track to deliver on our promise to transform the state,” she said.
Labor, in a raucous start to Question Time, demanded to know what “Plan B” would be, with Premier Mike Baird deriding Opposition Leader Luke Foley for opposing the sale of the energy assets but now attacking the delay in the sale.
The Baird government would use the proceeds from this deal, as well as from an earlier $10.26bn sale of TransGrid to a consortium led by Westpac-owned Hastings Fund Management, to pay for major infrastructure projects.
The state’s infrastructure recycling fund had received $16.5bn at the end of June, with commitments of $14.6bn.
The issue has escalated against a background of increasing concerns about Chinese aggression in the South China Sea and warnings in the Chinese state-owned media that if Australia joined US naval patrols through contested waters “it will be an ideal target for China to warn and strike”.
The Foreign Investment Review Board had been considering whether the two bidders should be allowed to lease the grid.
In April this year, Mr Morrison outraged investors and sparked warnings about Australia’s $120 billion trade relationship with China by preparing to block a foreign bid for the nation’s largest single landholding, the S. Kidman & Co cattle empire.
Asked what message today’s rejection sent to other foreign investors who may be considering Australia for business, Mr Morrison replied: “That we have a robust process for examining foreign investment in Australia, that we welcome foreign investment in Australia, and we continue to do that.
“In 2013-14, some $160-odd billion dollars’ worth of investments were approved in Australia, and we continue to approve investments where they are deemed to be not contrary to the national interest, and that is across a broad range of countries.
“We will continue to actively engage with the rest of the world because foreign investment capital is important to Australian jobs.”
Mr Morrison said the federal government would continue to work with the NSW government through the next stage of the process “to ensure that the benefits of this new infrastructure investment are realised for the NSW community”.
The Treasurer had gained support for a firm line on foreign investment, with Coalition MPs backing his concern about national security factors.
State Grid has been under scrutiny over the deal as key Senate crossbenchers, including Nick Xenophon and Pauline Hanson, expressed concern about the foreign ownership of a vital asset.
Authorities were also vetting a bid from CKI.
MPs privately said they did not expect any blowback in the partyroom if Chinese bids were rejected, with the national interest concerns taking priority over the Liberal Party’s traditional reluctance to put curbs on investment.
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