The Ausgrid decision: new questions

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James Laurenceson, Deputy Director, Australia-China Relations Institute, University of Technology Sydney

Bids by China’s State Grid for electricity distribution assets in South Australia (2012) and Victoria (2013) were approved on the basis that they were in the national interest. On Thursday Treasurer Scott Morrison blocked State Grid’s bid, along with that of Cheung Kong Infrastructure’s, for NSW electricity distributor Ausgrid. He said it was his preliminary view the deal was contrary to the national interest on the grounds of national security. On Friday the Treasurer said that Ausgrid’s assets and the structure of the deal was different to previous cases. 

1. In 2015 State Grid was amongst a group of bidders cleared by the Foreign Investment Review Board (FIRB) to purchase the lease to operate Transgrid. At the time a spokesperson for Treasurer Morrison pointed to: extensive consultations over the last several months; each bidder being fully aware of the national interest requirements; all relevant Commonwealth agencies being involved in the discussions.[1]

2. Ausgrid’s assets provide power to 1.7 million homes and businesses throughout Sydney, the Hunter and the Central Coast.[2] Transgrid’s assets provide power and telecommunications services to government departments, defence bases and intelligence agencies in NSW and Canberra.[3]

3. Expressions of interest to acquire a 50.4 percent share of the lease to operate Ausgrid’s assets – the deal that Treasurer Morrison rejected on Thursday August 11 – commenced on November 24 2015.[4]

4. On December 4 2015 Treasurer Morrison appointed former ASIO head David Irvine to the Foreign Investment Review Board to boost its capacity to provide advice on matters relating to national security.[5]

5. In response to Treasurer Morrison’s decision to block the sale of Ausgrid, NSW Treasurer Gladys Berejiklian said: “The NSW Government and all bidders who submitted binding bids have been engaging with the ACCC, ATO and FIRB since December 2015”.[6]

6. In another comment on Thursday August 11 Treasurer Berejiklian added: “There were a number of people who came forward as bidders in December last year. At that time the Federal Government gives its indications as to which bidders were OK to proceed from that point in time. So along the process the Federal Government and its agencies had given the bidders every indication that they could continue through the process”.[7] That includes the short-listing process in March that narrowed the field to three companies, all Chinese.[8] This raises the question: what changed in recent months?

7. Commonwealth Treasurers rejected three foreign investment applications between 2001-2015. Two applications have been rejected in the last four months, both involving Chinese bidders.[9]

8. In rejecting a bid by the Singapore Stock Exchange to acquire the Australian Stock Exchange in 2011, Treasurer Wayne Swan said: “My decision was based on unambiguous and unanimous advice from FIRB that the proposed transaction was contrary to the national interest”.[10] In rejecting the bid by State Grid on Thursday August 11, Treasurer Morrison made no mention of FIRB saying only that: “…during the review process national security issues were identified…”[11] This raises the question: where did the Treasurer get his advice?

Author

Professor James Laurenceson, Deputy Director, Australia-China Relations Institute, University of Technology Sydney