Date
24 July 2017
The Ausgrid deal is valued at US$7.7 billion but the Australian government is not so sure about it because of national security concerns. Photo: Reuters
The Ausgrid deal is valued at US$7.7 billion but the Australian government is not so sure about it because of national security concerns. Photo: Reuters

Australia balks at China, Hong Kong bids for power grid

Australia is moving to block State Grid Corp. of China and Hong Kong’s Cheung Kong Infrastructure Holdings Ltd. from taking a controlling stake in the country’s largest electricity network over national security concerns.

Treasurer Scott Morrison has given both companies one week to respond to concerns over their competing bids for 50.4 percent stake in Ausgrid, the Wall Street Journal reports.

Federal lawmakers fear the deal, valued at more than A$10 billion (US$7.7 billion) could threaten vital infrastructure.

“Ausgrid’s footprint includes critical power and communications services that Ausgrid provides to businesses and government,” Morrison said.

“The national security concerns are not country specific and relate to the transaction structure and the nature of the assets,” he said.

Cheung Kong said in a statement that it generates more than 90 percent of profits outside of Hong Kong and mainland China and noted that the company is incorporated in Bermuda, not Hong Kong, where it is listed.

State Grid had no immediate comment.

Ausgrid, with almost 1.7 million customers and assets valued at A$15.3 billion, has attracted foreign interest because it is seen as offering stable, regulated returns from a network the size of New Jersey, stretching from Sydney to fast-growing coastal regions north of Australia’s largest city.

The New South Wales state government had hoped to raise more than A$10 billion from the 99-year lease of the electricity network, using the money to fund new infrastructure construction and pay down debt.

But foreign investment is an increasingly thorny issue in Australia, especially after elections last month left Prime Minister Malcolm Turnbull’s conservatives with a fragile grip on power.

Lawmakers from across the political spectrum have raised concerns over the privatization deal.

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