Australia blocks China bid to lease power grid

Deal involved lease of 50.4% of Ausgrid, the key power network in nation's largest state

Australia's Treasurer has moved to block a A$10 billion (S$10.3 billion) deal to lease the nation's largest electricity grid to foreign bidders from China and Hong Kong, citing "national security concerns".

In a move that will raise concerns - especially in Beijing - about Australia's openness to foreign investment, Treasurer Scott Morrison said the proposals to lease the grid were "contrary to the national interest".

The deal involved the 99-year lease of 50.4 per cent of Ausgrid, the main electricity network in the nation's largest state of New South Wales. The grid provides power to 1.6 million homes and businesses in Sydney and across the state. 

Some security analysts warned that leasing the infrastructure increased the risk of cyber attacks, particularly if the grid was controlled by Chinese entities.

The two main bidders were understood to be China's state-owned State Grid Corp and Cheung Kong Infrastructure Holdings, owned by Hong Kong billionaire Li Ka-Shing. 

Some security analysts warned that leasing the infrastructure increased the risk of cyber attacks, particularly if the grid was controlled by Chinese entities. 

Mr Morrison refused to provide details of the specific security concerns but insisted they were not related to a single country. He said he was concerned that the grid covers the "critical" supply of power and communications to businesses and government.

"Ausgrid's footprint includes critical power and communications services that Ausgrid provides to business and government," he said.

"The national security concerns are not country-specific and relate to the transaction structure and the nature of the assets."

Asked about the security concerns, he said: "The only person who is security-cleared in this room to be able to hear the answer to that question is me."

The bidders have been given until next Thursday to respond before the decision is made final. The Labor opposition party said it supported the government's decision.

"Labor agrees that national security considerations must be paramount in foreign investment approval decisions," said its Treasury spokesman, Mr Chris Bowen.

The decision comes amid growing concerns about the sale of Australian assets to foreign investors. 

The federal government has twice blocked the sale of the nation's largest property holding, S. Kidman & Co, to Chinese investors, saying the deal was not in the national interest.

Some analysts have argued that the Ausgrid network is a vital piece of infrastructure and that it should not be sold to Chinese firms because this could enable large-scale cyber attacks.

The executive director of the Australian Strategic Policy Institute, Mr Peter Jennings, urged Canberra to block the deal, saying Australia could not risk selling the power grid to a Chinese state-owned firm or to an entity based in Hong Kong, which is under "increasingly intrusive control from Beijing".

He said he had specific concerns about China because it was growing more assertive in the region and was increasingly authoritarian.  

"Clearly China doesn't have to own a piece of Australian critical infrastructure to want to hack into it," he wrote in The Australian.

"But the problem for Sydney's poles and wires is that ownership by a Chinese state-owned entity makes it enormously challenging to protect the security of the grid without their being a risk that Chinese intelligence services might try to exploit the connection."

The decision comes amid a growing tide of protectionism in Australia, particularly in the wake of the federal election last month.

A version of this article appeared in the print edition of The Straits Times on August 12, 2016, with the headline 'Australia blocks China bid to lease power grid'. Print Edition | Subscribe