Thu, Aug 11, 2016 page10

• China power giant’s grid bid tests investment nerve

  • Bloomberg
  • • 
    • 
    • 

  State Grid Corp of China’s (國家電網) hopes of buying one of Australia’s biggest electricity distributors might be slipping away amid national security concerns and a protectionist backlash against foreign ownership of critical infrastructure.

  Government-owned State Grid, the world’s largest utility, and Hong Kong’s Cheung Kong Infrastructure Holdings Ltd (CKI, 長江基建) are vying to buy Ausgrid, which supplies 1.6 million homes in and around Sydney and might fetch more than A$10 billion (US$7.71 billion), people familiar with the matter said.

  Both bids are being evaluated by the New South Wales government and require the approval of Australian Treasurer Scott Morrison, who has said that national security is the primary consideration in deciding whether to allow foreign buyers.

  “It certainly looks like there is very little chance that Australia clears State Grid to buy this asset,” said Peter Jennings, executive director of the Australian Strategic Policy Institute.

  “Internationally, we are seeing a changing attitude toward Chinese investment, on the back of years of Chinese hacking and espionage around the theft of data and intellectual property,” he said.

  The sale comes as Australia balances the need for foreign investment to drive economic growth against mounting public opposition to sales of farmland, real estate and strategic infrastructure, particularly to Chinese investors.

  Rejecting State Grid’s bid risks straining ties with Australia’s most important trading partner — something Chinese state-run media was swift to point out this week.

  Australia would be “looking for a bone in an egg” to oppose the deal on national security grounds, China’s Global Times cited academic Zhou Shijian (周世儉) as saying on Tuesday.

  Despite overseas capital being vital to Australia’s future expansion, the government is arguably making it harder for foreigners to invest. Last year, it tightened scrutiny of sales of farmland to Chinese, Japanese and South Korean buyers. The government board that vets investments now includes a former spy chief.

  When the administration of US President Barack Obama last year raised concerns that a Chinese company had bought a port in the northern city of Darwin, where US Marines are based, Morrison beefed up oversight of the sale of state assets. He has also blocked the sale of the iconic S. Kidman & Co cattle station to a Chinese-led group, saying it could be against the national interest.

  Earlier this year, State Grid bought a stake in Brazilian power distributor CPFL Energia SA for US$1.8 billion, and it already owns parts of electricity networks in South Australia and Victoria.

  The company missed out last year when New South Wales electricity transmission network TransGrid was sold to a group of investors from Canada, the Middle East and Australia’s Hastings Funds Management Ltd for about A$10.3 billion.

  CKI, the listed group controlled by Hong Kong billionaire Li Ka-shing (李嘉誠), owns stakes in electricity grids that service cities including Melbourne, Wellington and London.

  Jennings said it was possible that Morrison might also block CKI’s bid “given the growing direct influence that the Chinese government has in Hong Kong.”

  A spokesman for Morrison said he does not comment on individual cases being assessed by the government and the Foreign Investment Review Board (FIRB). Neither State Grid nor CKI responded to requests for comment.

  Security researcher Craig Valli said that while State Grid would have absolute power to shut down the electricity grid if its bid was successful in New South Wales, it was the “stuff of hysteria” to imagine it would and dismissed wider concerns of espionage.

  “At this point I see little risk,” said Valli, the director of the Security Research Institute at Edith Cowan University in Perth who focuses on network and infrastructure security.

  “Do you think someone’s energy-use pattern is going to be of use? Are you going to blackmail someone about their energy use? No,” he said.

  State Grid is not alone in having its bid examined by Morrison and FIRB. They are also combing over proposals by Chinese companies to purchase assets including oncology services provider Genesis Care Ltd and vitamins and supplements maker Vitaco Holdings Ltd.

  The prospects for Chinese suitors have not improved since the July 2 election saw a swag of protectionist independent or minor party lawmakers elected to the Australian Senate.

  The National Party, the junior partner in Australian Prime Minister Malcolm Turnbull’s coalition, which has been a vocal critic of investment by Chinese state-owned companies, also now has a bigger voice in the government.

  Those domestic political considerations might make it harder for Turnbull to avoid a geopolitical headache, according to Jennings.

  “If the bids are denied, and in particular if State Grid is blocked, that will not be warmly welcomed in China,” he said.
• Most Popular

  • 1

    Napoli’s title hopes shaken by late Genoa equalizer

  • 2

    Privately owned city in Kenya taking on corrupt officials

  • 3

    MOE to encourage foreigners to work in Taiwan

  • 4

    Kane tastes first title as Bayern bid farewell to Mueller

  • 5

    Taiwan celebrates V-E Day for first time