Canberra to block $13bn China pipeline deal

Josh Frydenberg has invoked national interest to signal he will reject a Hong Kong-based company’s $13bn bid for APA.

Treasurer Josh Frydenberg. Picture: AAP

Josh Frydenberg has invoked the “national interest” to signal he will reject a Hong Kong-based company’s $13 billion bid for critical infrastructure gas pipeline company APA on the eve of Foreign Minister Marise Payne’s visit to China aimed at mending the relationship.

The Coalition has also used an intervention by diplomats at the UN ahead of Senator Payne’s long-awaited visit to indirectly criticise China’s increasing contro­l over Hong Kong, saying it needed to maintain a “one country, two systems” framework.

In a move certain to raise concerns in Beijing, the Treasurer released his preliminary view yesterday that the bid for APA from CK Infrastructure would not be in the national interest because it would establish a dominant foreign player in the gas and electricity sectors.

“I have formed this view on the grounds that it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business,” Mr Fryden­berg said.

“My preliminary view reflects the size and significance of APA Group. It is about the extent to which the proposal is consistent with Australia’s national interest.

He said the APA Group was “a unique company”, supplying gas for part of all mainland capital cities’ consumption as well as controlling gas-fired electricity generation assets and liquefied natural gas exports.

Hong Kong billionaire Li Kash­ing’s CKI has rejected claims from security experts that the company would be answerable to Beijing given China’s more frequen­t interventions in Hong Kong’s affairs and attempts to suppress political freedom.

The APA decision closely follows Canberra’s move to block Chinese companies Huawei and ZTE from participating in the rollout of the 5G telecommunications network.

Mr Frydenberg revealed that the Foreign Investment Review Board, chaired by former top spy David Irvine, was split over the decision, which the competition watchdog cleared last month.

A possible FIRB veto has alway­s been seen as the major hurdle, but there is still a ray of hope for CKI. The Australian under­stands that the company could use the two weeks before the Treasurer’s final decision to change its takeover proposal.

Lowy Institute senior fellow Richard McGregor said CKI could be tempted to ease the governme­nt’s concerns by finding an Australian partner.

“Maybe CKI could get an Australian partner but it is not clear how that gets over the monopoly problem,” he said.

Mr McGregor said Mr Frydenberg’s statement did not necessarily mean CKI was being treated as a Chinese company.

“If there is any consolation for CKI, the Treasurer seems to have accepted for now that the Hong Kong company is a genuine commerci­al entity and should not be marked down as a proxy for Beijing,” he said.

CKI did not comment after the announcement, other than ­noting that Mr Frydenberg’s prelimin­ary view was a reflection on the size and significance of APA — not an adverse reflection on the company.

Labor’s Treasury spokesman Chris Bowen said he was waiting to be briefed on the decision. “I note the minister’s draft decision and have been offered a briefing by FIRB, which I look forward to taking up shortly,” Mr Bowen said.

Australian Strategic Policy Institute executive director Peter Jennings said the government made the right call in blocking CKI’s bid, given the national interest concerns and sensitivity of the assets.

“It’s a tough call to balance investment with domestic security concerns, but I think it’s the right decision,” Mr Jennings said. “The aggregation factor was really compelling because, if you stepped back, Hong Kong and mainland China would basically control 100 per cent of gas and electricity transmission and distribution down the east coast and a chunk in West Australia. By any stretch, that was just too much.”

Centre Alliance senator Rex Patrick and Liberal senator Jim Molan also welcomed the move.

“This proposed takeover set off Centre Alliance economic and national security alarm bells the moment it was announced,” Senator Patrick said. The issue has gained public attention, including from radio host Alan Jones, who raised the issue with Mr Frydenberg in recent weeks.

At the time, the Treasurer declined to comment on the decision-making process but CKI tried to address the mounting concerns last month, denying it operated under any Chinese government influence.

CKI deputy managing director Andrew Hunter said the company, controlled by the billionaire Li family, held itself to the highest standards of corporate governance, took directions from a board, and was answerable to shareholders that were largely global institutional investors.

The preliminary decision came shortly after the government used a UN review of China’s human rights record to release its strongest criticism yet of China’s arbitrary detention of Uighur Muslims in Xinjiang. The statement urged Beijing to follow through with its promise to preserve Hong Kong’s autonomy.

Senator Payne is set to meet Chinese Foreign Minister Wang Yi today after a long diplomatic freeze. Australia and Hong Kong are negotiating a free trade deal that could be finalised by the end of the year.