China Ausgrid bid must pass test on security: Scott Morrison
Scott Morrison has declared the nation’s security will be the top priority for deciding on a Chinese lease on Ausgrid.
Scott Morrison has declared the nation’s security will be the top priority as the Turnbull government faces a crucial decision on whether to allow a Chinese company to buy a 99-year lease on half of the major NSW power distribution network, Ausgrid.
The issue is set to escalate 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 is considering whether the two Chinese bidders, the state-owned State Grid Corporation and Cheung Kong Infrastructure Group (CKI), which is registered in Hong Kong and part owned by billionaire Li Ka-shing, should be allowed to lease the grid.
“National security will be my prime consideration,” the Treasurer said on Sky News’s Australian Agenda program yesterday.
The deal would be worth more than $10 billion and the possibility that one or both of the Chinese companies could be knocked out of the race could set the federal Liberal Party up 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.
A NSW government spokesman declined to comment last night. However, The Australian has been told there have been extensive talks of the deal among the NSW government, bidders and bodies such as the Australian Competition & Consumer Commission, the tax office and the FIRB.
Mr Morrison pointed out that he appointed former ASIO chief David Irvine to the FIRB board to help more clearly identify security threats. He said the Ausgrid decision was “not too far away”.
The decision will follow the controversial lease of Darwin’s port to a Chinese-owned company, the rejection of the sale of the Kidman cattle properties over security concerns and the government’s approval of the Kimberley Ord River cattle station sale before the election.
Peter Jennings, the executive director of the Australian Strategic Policy Institute, warned in The Weekend Australian that the way Australia dealt with Chinese investment in critical infrastructure needed to be reconsidered in the face of Beijing’s assertive posture in the region.
Andrew Hastie, a former SAS officer and now the Liberal MP for the West Australian seat of Canning, endorsed Mr Jennings’s concerns. “This is an important article that Australians should read and discuss,” Mr Hastie said.
One Nation leader Pauline Hanson and fellow Queenslander Bob Katter have campaigned aggressively against foreign investment in critical infrastructure. Nick Xenophon has said any sale to a foreign government-owned company should raise national interest concerns.
But former Business Council president Tony Shepherd said foreign capital had always been vital for Australia’s prosperity. “Provided the bidder is of good standing then the best deal for NSW should win,” he said.
Former Ansett and British Airways chief Rod Eddington cautioned against anti-Chinese sentiment, saying the nation had “always relied on foreign capital to help us grow our businesses and create our jobs”.
TransGrid chairwoman Kerry Schott said Australia needed foreign capital to develop.
While she expected security to be part of the FIRB’s assessment, “it’s not as if somebody in China is going to flick a switch and the lights are suddenly going to go off’’.
Former Shanghai Australian Chamber of Commerce president Peter Arkell said he was baffled that Australia could risk squandering the opportunity for Chinese investment as the topic “gets kicked around like a footy”.
But Mr Morrison, asked how big a part in the decision would be played by security factors and concerns about control of strategically important infrastructure, said: “It is the prime consideration. It is the most important consideration and always is.
“It is why I put David Irvine on the FIRB. It is why I put David Peever (who headed a major review of the Defence Department) on the FIRB — to have the national security experience and input into these decisions and to assist me making these decisions.”
Privatisation in NSW is expected to pay for $20bn of infrastructure, which includes a second harbour rail crossing and extensions to WestConnex.
While the government reaped more than $10bn from its lease of TransGrid, key projects will depend on the partial lease of Ausgrid and also of distributor Endeavour Energy going ahead.
Gary Sturgess, who advised former Liberal premier Nick Greiner and is at the Australia and New Zealand School of Government, said the Ausgrid lease was different to the sale of cattle properties.
“If people want to pour some of their spare cash into Australian assets, I mean, frankly that’s how this country got built ... the Europeans pouring money into our country,” Mr Sturgess said. “This is not an asset they can run away with.”
Industry sources saidthat should State Grid be successful in acquiring Ausgrid it would control electricity and gas connections to more than one million homes and businesses across NSW.
An issue likely to be considered by the government is whether safeguards, conditions or limitations can be imposed on the bidders to ease security concerns.
Another is whether the two companies should be viewed differently. State Grid is clearly owned by China’s government. CKI has already invested heavily in Australian infrastructure but its base in Hong Kong is under increasingly intrusive control from Beijing.
State Grid already holds 46 per cent of the South Australian transmission business Electranet and 60 per cent of the Jemena energy distribution business and its 11,000km network, which delivers electricity to more than 319,000 homes and business in northwest Melbourne, and its 25,000km system which delivers gas to more than 1.3 million homes, businesses and industrial customers in NSW.
CKI owns SA Power Networks, a primary state electricity distribution business, CitiPower, which supplies electricity to Melbourne’s CBD and inner suburbs, Powercor, Victoria’s largest electricity distributor, Transmission General Holdings, a Victorian renewable energy power transmission business, and Australian Gas Networks, one of Australia’s largest natural gas distribution firms.
