Australia blocks $10bln sale of Ausgrid to Chinese state owned companies

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Treasurer Scott Morrison blocks sale of majority stake in Ausgrid to Chinese interests, citing national security issues.

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The Australian government has made a preliminary ruling to block the potential sale of a 50.4 per cent stake in New South Wales network operator Ausgrid to a Chinese state owned consortium, citing national security issues.

ausgridThe announcement was made by Treasurer Scott Morrison in relation to the proposed $10 billion lease of the majority stake in Ausgrid, a major plank of the NSW government’s privatisation plan.

“When we assess these applications – and I stress we do this on every case, case by case, and we pursue the national security issues to the nth degree as I said on the weekend, and that’s what we’ve done,” Morrison told reporters.

“That process has not enabled us to identify suitable mitigations to protect against the national security issues in this case. And that, at the end of the day, is paramount.”

Ausgrid supplies power to parts of Sydney, Wollongong and the Hunter region.

NW Treasurer Gladys Berekjiklian expressed surprise at the move, saying that the federal government had raised no concerns when potential bidders were identified earlier in the sales process.

She said it was an asset that had attracted a lot of interest. “There is a lot of interest out there … the proceeds of this sale will be banked in the next budget.”

Morrison said foreign investment was welcome in Australia, and promised the government would “actively engage” with the rest of the world, “ because foreign investment capital is important to Australian jobs”.

He has given the parties until August 18 to produce arguments against his preliminary decision.

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  1. solarguy 4 years ago

    A welcome move by Morrison. Lets hope he sticks to it!

  2. David leitch 4 years ago

    A retrograde step. If it had been a USA bidder would it have been stopped? NSW will now get less money to fund its infrastructure program. Also I would expect the Chinese Govt to keep this in mind and they have very long memories.

    • Brian Tehan 4 years ago

      Ok, economics 101. Based on a $10 billion price, which it’s probably only worth to the Chinese, the return on investment (profit from the Ausgrid annual report) is currently about 4.2%. The NSW government can borrow at less than this, so they are better off borrowing the money for infrastructure and using the income from Ausgrid to pay the loan. They can actually borrow more for even more infrastructure, using the Ausgrid income.
      Your last statement suggests that you care a little too much for the possible hurt feelings of the PRC.

      • David leitch 4 years ago

        Brian your comment makes me smile. If you google “good for the state bad for the budget” you’ll find I’ve had plenty to say on this in the past and have appeared in front of the upper house of NSW parliament on the topic.

        There is more to it than you would think. At this stage I’ll just confine myself by pointing out that the AFR says that StateGrid had offered $14 bn for the 50.4% stake. Billions more than anyone else will offer. NSW taxpayers will all be the losers. Anyhow it is what it is.

        Whoever buys it will also be taking the risk on the AER v ACT appeal to the full federal court. That decision could now possibly be handed down before the sale and if the court finds for the AER the price will maybe reduced by billions more.

        • Jonathan Prendergast 4 years ago

          Ah, that was your report title! 🙂

  3. Geoff 4 years ago

    good. finally someone stepping in and stopping this sell off madness. baird would sell he’s own mother if he could.

  4. tsport100 4 years ago

    This is the UK’s mo… sell the crown jewels… ‘privatise’ every state owned income generating asset to foreign buyers sending huge chucks of revenue off-shore for generations to come and out of the local economy to pension funds in other parts of the world… while giving away monopoly pricing power to a foreign entity.. Seriously with $2 Trillion under management in local superfunds… why aren’t Australian pension funds buying this?

    • John Herbst 4 years ago

      Australian pension funds can’t maintain the network, but can invest in Spark Infrastructure (SKI) and other private companies that do.

  5. onesecond 4 years ago

    China is not a democracy and it is not a free market economy, so this decision makes sense.

    • Jon 4 years ago

      Except that they already own the network in SA and one in Vic. Furthermore there a numerous other overseas owners and investors in Australia’s energy infrastructure, including the French, Japanese, Canadians, and US. This is a decision based on populist Hanson style politics. The government has not explained what the so called security risks are, and if they are real, how are they going to deal with the existing Chinese ownership of similar infrastructure?

      • onesecond 4 years ago

        It is all about the direction in which they are going currently. All their promises of making the Yuan a free tradable currency and their economy a free market haven’t hold up and they are getting more aggressive in their expansion at sea and seek conflict with the other countries in the area. That decisions sends the right message right now.

  6. Jonathan Prendergast 4 years ago

    One could argue that global trade sees trading countries invested in each other, and therefore improved national security and global peace. Would China State Grid be asset lessors or managing the HV switchgear? More interested in maintaining their revenue or their ability to cut the power to Garden Island?

    This ruling by Morrison will not stop the lease proceeding, just rule out a couple of bidders.

    It has been interesting to see various privatised DNSPs participating in some innovative projects, where as government owned DNSPs have been a bit risk averse.

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