NO DEAL: Scott Morrison blocks sale of Ausgrid to Chinese bidders 'on the grounds of national security'

Scott Morrison. Photo: Getty Images

Federal treasurer Scott Morrison has just announced he is opposed to a controlling lease in NSW power network Ausgrid to Chinese bidders on national security grounds.

Morrison announced in a preliminary decision that he was opposed to the 99-year lease of Ausgrid to either Chinese state-owned company State Grid or Hong Kong’s Cheung Kong Infrastructure.

The bidders for Ausgrid, which supplies power to the Sydney area, will now be given an opportunity to respond to Morrison’s concerns.

Experts have warned that giving foreign government-backed companies control over grid assets could present a national security risk. The grid could potentially be hacked and shut down by agents with access.

Morrison said that “during the review process national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments.

“I am, of course, open to consider what the bidders put to me, but at this stage no suitable mitigations have been identified that would, for the proposed transaction structure, appropriately address the identified risks.”

Relations between Australia and its biggest trading partner, China, have been somewhat strained in recent weeks. State media recently called for military strikes on any Australian vessels that might enter the South China Sea, where China has been engaged in controversial land reclamation and construction of military facilities.

It has also been reported that Chinese spies have been engaged in “brazen” acts of espionage in Australia, and energy networks have been subjected to hacking attacks, with foreign governments suspected of involvement.

Earlier this year the treasurer also vetoed the sale to Chinese buyers of S. Kidman and Co, Australia’s largest cattle property, worth more than $370 million.

State Grid is the world’s largest electricity company and it already controls assets in Australia, including a 46.5% stake in the South Australian electricity transmission network and 20% of Victorian transmission assets.

In a press conference today Morrison said in response to a question on his specific security concerns, that “the only person in the room with security clearance to hear that answer is me”.

Morrison’s full statement is below:

Following careful consideration and consistent with the formal process required, I have today informed the bidders for the lease of 50.4 per cent of Ausgrid, the New South Wales electricity distribution network, that my preliminary view is that the foreign investment proposals put to me for this transaction are contrary to the national interest, in accordance with the required provision on the grounds of national security. I have invited the bidders to make submissions to me by 18 August 2016 in order to make a final decision after that time.

There has been an extensive period of engagement with the New South Wales Government and the bidders around the proposed lease. This has involved a detailed examination of national interest issues and possible measures which could mitigate identified risks.

In particular, during the review process national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments. I am, of course, open to consider what the bidders put to me, but at this stage no suitable mitigations have been identified that would, for the proposed transaction structure, appropriately address the identified risks.

As Treasurer I consider each foreign investment proposal on its merits.

Foreign investment has underpinned the development of our nation and we must continue to attract the strong inflows of foreign capital that our economy requires. Without foreign capital and investment, Australia’s output, employment and standard of living would be lower.

The foreign investment framework facilitates such investment while giving assurance to the Australian community that the investment is being made in a way that does not compromise Australia’s national interest. We will continue to welcome foreign investment that is not deemed contrary to our national interest.

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