Citing national interest concerns, Australia officially banned on Friday the sale of a majority stake of its largest power distribution grid to foreign investors, drawing a warning to Australia from the Chinese commerce ministry.

China’s government-held State Grid Corp of China was bidding for Ausgrid. Hong Kong-based Cheung Kong Infrastructure Holdings, owned by billionaire Li Ka-Shing, was also in the running, and was equally rejected as a buyer by Australia.

Australia’s ban will have a negative impact on the bilateral trade, and will hurt the willingness of Chinese groups to invest in Australia, the Chinese commerce ministry said.



Australia is planning a 99-year lease of 50.4 percent of New South Wales’ electricity distribution grid Ausgrid worth an estimated US$7.5billion, but national interest has prevailed over foreign investment. A sale under the currently proposed structure “would be contrary to the national interest”, Treasurer Scott Morrison said in his statement.

Morrison, on preliminary view, first informed China and Hong Kong that their bids may be rejected, and that a formal decision would be issued pending a response from China.

Australia, which has had a free trade agreement with China in place since December of last year, is now riling up one of its biggest trading partners.



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This is not the first time China has been snubbed by Australia in its attempt to buy into strategic companies. In April this year, Treasurer Morrison blocked the sale of 80 percent in S. Kidman and Co. Limited – the world’s biggest cattle farm – to a Chinese consortium, again citing concerns that the deal may run “contrary to the national interest”.

The most recent Australian hurdles to Chinese investments add to the Hinkley Point saga in the U.K. Concerns had been mounting that as a UK-French-Chinese joint venture, it would give China the opportunity to influence a significant U.K. energy resource for decades to come, especially under present agreements.

The news comes after last week’s news that the Chinese firm involved in the construction of Hinkley, CGN, and its engineering advisor Szuhsiung Ho have been indicted on charges of industrial espionage in the United States. The charges relate to alleged attempts to steal nuclear secrets to aid the Chinese nuclear energy program.



By Tsvetana Paraskova for Oilprice.com

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