China tips in $2bn for Melbourne port stake

China has made its first multi­billion-dollar investment in Australian infrastructure assets since the blocked Ausgrid sale.

Victorian premier Daniel Andrews has hailed the port lease as a ‘$9.7bn vote of confidence in the state’s economy’. Picture: Aaron Francis

China has made its first multi­billion-dollar investment in Australian infrastructure assets since it was blocked from buying NSW electricity provider Ausgrid, leaving business to declare the country open to overseas investment.

CIC Capital, China’s $US200 billion sovereign wealth fund, has emerged as a member of the QIC and Future Fund-led Lonsdale Consortium, which has agreed to pay $9.7bn for a 50-year lease over Australia’s busiest port.

The Chinese wealth fund has committed almost $2bn for a 20 per cent slice of the Port of Melbourne, helping to hand the Andrews government a windfall gain and reigniting the debate about Chinese investment.

The Foreign Investment ­Review Board granted “conditional approval” for the lease of the Port of Melbourne last week subject to conditions being met, although those conditions were not disclosed by Scott Morrison.

The deal has been welcomed by business and industry groups, with the sale price — almost twice the original estimates — hailed as an injection of confidence in the Victorian economy.

Australian Industry Group’s Victorian head, Tim Piper, said the sale confirmed the country was open to overseas investors.

“As far as I’m aware, this is the first major government infrastructure project that has been ­allowed since the Ausgrid decision in NSW,” Mr Piper said.

“The federal government would be hoping to show that the country is open for business and that each individual circumstance is taken into account.

“While you can speculate as to why this has been allowed, one would assume, because there are a number of overseas investors in this project and no one has a ­majority position, that it probably made the FIRB feel more comfortable with its decision.’’

The sale — the biggest privatisation deal to take place in Victoria since the carve-up of the state’s $24bn worth of energy ­assets more than two decades ago — comes after the federal Treasurer last month blocked the sale of Ausgrid to Chinese and Hong Kong bidders, citing “national ­security concerns”.

Australia has risked accusations of xenophobia at a time when China’s interest in it as a place to invest is growing rapidly, up almost 70 per cent to $46.6bn last financial year. While most of that went into real estate, China has a growing interest in acquiring port assets worldwide, with the nation’s privately held Shandong Landbridge Group controversially paying $506 million for a 99-year lease for the Port of Darwin last year.

The move came as Mr Morrison yesterday forced the sale of a further 16 residential properties, worth $14m, held by foreign ­investors because they were in breach of the law. The properties were bought in Victoria, NSW, Queensland and Western Australia, with prices ranging from $200,000 to $2m, and involved ­individuals from Britain, Malaysia, China and Canada.

Infrastructure Partnerships Australia chief executive Brendan Lyon said the Port of Melbourne lease deal was timely. “I think it’s very important that the first transaction with Chinese investment since Ausgrid has been successful,” he said. “And hopefully it ­begins to put some certainty into the China Australia bilateral relationship. I still find it difficult to ­understand the basis for the rejection of Chinese investment in Ausgrid and I don’t understand the strategic concern that could have been contemplated at the start of the transaction rather than several weeks after the end.”

Mr Lyon said Australia did not have reason to be scared of foreign investment with the right protections and consideration. “But what we should be very scared of is that we dull the incentives for foreign investment which has led to the sort of pricing in the Port of Melbourne (lease),’’ he said,

Peter Costello, the Future Fund board of guardians chairman, said the Port of Melbourne was critical to trade. “The Port of Melbourne is a high-quality asset and an important link between Australia and its trading partners,’’ he said.

“We’re delighted to invest in it and to add it to our portfolio of Australian and global infrastructure assets. It will be an important contributor to our long-term ­investment objectives as Australia’s sovereign wealth fund.”

The rejection of the Ausgrid bid was seen as a major setback for NSW Premier Mike Baird, who had hoped the $10bn sale would help raise necessary funds for ­infrastructure projects. While Victorian Premier Daniel Andrews, who travels to China this week on a trade mission, hailed the port lease as a “$9.7bn vote of confidence in the state’s economy”, his government is also set for a bitter showdown with Canberra over a potential $1.45bn bonus payment flowing from the deal.

State Treasurer Tim Pallas yesterday confirmed proceeds from the sale would be placed into the newly established Victorian Transport Fund to be funnelled ­towards infrastructure, such as ­removing 50 rail crossings and the multi-billion-dollar Melbourne Metro rail tunnel. This entitled the state to a 15 per cent top-up under the commonwealth’s asset ­recycling initiative, he said, which would push the windfall from the port lease sale to more than $11bn.

A spokesman for Mr Morrison said that, after two years of operation, the asset recycling initiative was closed to new agreements on June 30 this year. “Notwithstanding the absence of this agreement, the commonwealth will now work in good faith with the Victorian government to determine an agreement on how the $877.5m of ARI funds set aside for Victoria could be allocated,” he said.

Mr Pallas said the money was owed to Victorians. “This Sydney-centric Prime Minister is yet again breaking his commitments and shortchanging Victoria,” he said.

“It’s not the fault of hardworking Victorians that Malcolm Turnbull and Scott Morrison can’t manage their budget properly.”