Morrison blocks Chinese bids for NSW power grid

Treasurer Scott Morrison blocked the sale of the Ausgrid lease on national security grounds. Mick Tsikas/AAP

Treasurer Scott Morrison has rejected Chinese bids for the 99-year lease of 50.4% of Ausgrid, the New South Wales electricity distribution system, for security reasons.

Against the background of mounting public debate about the extent of Chinese ownership of utility assets and land, Morrison said his preliminary view was that the “foreign investment proposals put to me for this transaction are contrary to the national interest on the grounds of national security”.

This follows advice from the Foreign Investment Review Board (FIRB), one member of which is David Irvine, the former head of the Australian Security Intelligence Organisation (ASIO) and the Australian Secret Intelligence Service (ASIS).

The two bidders were State Grid, a Chinese state-owned enterprise, and Cheung Kong Infrastructure, which is owned by Hong Kong billionaire Li Ka-shing.

The bidders have until August 18 to make submissions before Morrison announces his final decision.

Morrison said there had been extensive engagement with both the bidders and the NSW government, including examination of possible measures that could mitigate risks.

“National security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments … At this stage no suitable migrations have been identified that would, for the proposed transaction structure, appropriately address the identified risks,” he said.

Morrison declined to spell out the security concern in detail. “The only person who is security cleared in this room to be able to hear the answer to that question is me,” he told his news conference.

Asked whether he had made the security concerns clear to the bidders and if not, how could they find mitigating conditions, Morrison said “the issues of Australia’s national security are only disclosed to those who are in a position to be cleared for that purpose”.

“Australia’s national security is Australia’s business, and it will always be Australia’s business. And it’s something that we consider internally to protect that interest.”

NSW Treasurer Gladys Berejiklian said the state government and the bidders had been engaging with the Australian Competition and Consumer Commission, the Australian Taxation Office and FIRB since December 2015.

She said that regardless of what eventually happened, “there will be no delays” to the state government’s infrastructure pipeline.

“We will continue the transaction process for Ausgrid and note strong interest from investors in the asset,” she said.

The federal opposition did not dispute Morrison’s decision. Shadow Treasurer Chris Bowen said: “Labor agrees that national security considerations must be paramount in foreign investment approval decisions. Labor assumes and trusts that the treasurer is acting on advice of the national security agencies.”

“While the treasurer showed a willingness to engage in cheap point-scoring on foreign investment decisions in the election campaign, the opposition is prepared to accept this decision as being in the national interest on the basis that it was based on advice from the national security agencies,” Bowen said.

Crossbench senator Nick Xenophon says the decision by Morrison “highlights the urgent need for an overhaul of foreign investment rules that are much more transparent, and set out the national interest test more clearly”.

“Whilst I welcome the treasurer’s cautious and prudent approach to date, the current framework does not give confidence to those on both sides of this debate. For instance, I’m sure there will be some who query whether the national security concerns cited by the treasurer would apply equally to Hong-Kong-based CKI, a private company that operates on commercial terms, and the Chinese government-owned State Grid,” Xenophon said.

Earlier on Thursday Malcolm Turnbull was challenged on 2GB by Alan Jones over what Jones described as the “secret” March approval of the sale of Carlton Hill and Ivanhoe stations, which are run as one, in the Kimberley to Chinese company Shanghai Zhongfu. The land, settled by the Durack family, was previously British-owned. Turnbull said he did not have the facts in front of him but would speak with Morrison.

Facts matter. Your tax-deductible donation helps deliver fact-based journalism.