Treasurer Scott Morrison has made a preliminary decision to block the 99-year lease of NSW power asset Ausgrid to either Chinese state-owned company State Grid, or Hong Kong-based Cheung Kong Infrastructure.
Stressing it was a preliminary decision, Mr Morrison said it would be contrary to Australia’s national security interests to allow the lease to proceed.
The companies will have a week to respond to concerns.
“I have invited the bidders to make submissions to me by 18 August 2016 in order to make a final decision after that time,” he said.
Ausgrid capital expenditure and net profit.
“There has been an extensive period of engagement with the New South Wales Government and the bidders around the proposed lease. This has involved a detailed examination of national interest issues and possible measures which could mitigate identified risks.
“In particular, during the review process national security issues were identified in critical power and communications services that Ausgrid provides 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.”
Mr Morrison said he could not reveal what the national security concerns were and he rejected suggestions the decsion was motivated by domestic political pressures..
What one of the bidders, China’s State Grid, owns.
He said the decision did not mean Australia was opposed to foreign investment.
“We remain positively disposed towards foreign investment,” he said.
In a decision which at least temporarily mitigates the sticky politics of selling such a sensitive asset to a Chinese-government company, Mr Morrison did not sound confident that the sale would proceed to either company.
On Sunday, Mr Morrison said his decision would be guided primarily by national security concerns.
The NSW government expects to net more than $10 billion from the 99-year lease of 50.4 per cent of the electricity distributor, which supplies more than 1.6 million homes and businesses in NSW.
One Nation leader Senator Pauline Hanson, South Australian senator Nick Xenophon and Independent MP Bob Katter have either raised concerns over the sale to a Chinese state-owned enterprise, or are in outright opposition.
Liberals including Tony Abbott supported the sale with condition while others, like West Australian MP Andrew Hastie are opposed. recently, Ms Hastie posted an article by the Australian Strategic Policy Institute’s Peter Jennings on his Facebook page that warned of the possibility of electricity infrastructure, such as Ausgrid, being hacked and shut down by foreign governments.
“The problem for Sydney’s poles and wires is that ownership by a Chinese state-owned enterprise makes it enormously challenging to protect the security of the grid without there being a risk that Chinese intelligence services may try to exploit the connection,” Mr Jennings wrote.
State Grid and Cheung Kong Infrastructure, which was founded by Honk Kong billionaire Li Ka-shing made binding bids for the 50.4 per cent stake in Ausgrid late last month.
One of the offers is said to be more than 1.7-times the value of Ausgrid’s regulatory asset base.
State Grid, which already has extensive stakes in South Australian and Victorian power assets, as well as gas pipelines across Australia, was also a bidder for NSW-owned Transgrid, the first of three companies to be privatised last year and one with special sensitivity because it owns a telecommunications network that covers several federal government departments. But an alternative non-Chinese bidder ended up winning the auction in December, sparing Mr Morrison a decision similar to the one over Ausgrid.
Mr Morrison increased scrutiny of foreign investment proposals this year after the sale of the Port of Darwin to Chinese bidders by the Northern Territory government revealed uncertainty over how security agencies had signed off on the process and disquiet from the US government. As a result, state government asset sales would have to scrutinised by FIRB and former chief spy David Irvine was added to the FIRB board.
Mr Morrison also knocked back the sale of Australia’s largest cattle empire S.Kidman and Co to Chinese interests in April, saying it was contrary to the national interest.