New South Wales to re-launch Ausgrid sale

Australia's largest electricity grid is back on the block after a decision to reject offers from Chinese bidders.

The New South Wales government said it would swiftly move to relaunch the auction for the partial lease of Ausgrid, Australia's largest electricity network, after federal authorities confirmed their decision to bar Chinese bidders from the race. 

In a statement, NSW Premier Mike Baird and Treasurer Gladys Berejiklian underlined “the strong market interest for this valuable asset,” downplaying the fact that the excluded contenders had until last week been the only two suitors for the asset.

The state government expressed confidence that the proceeds of the Ausgrid transaction would be booked in the 2017-18 NSW budget, to be unveiled by June next year.   

Earlier this month, the NSW government decided to block bids from Chinese state-owned utility State Grid and Hong Kong infrastructure firm Cheung Kong Infrastructure, with Treasurer Scott Morrison describing their proposals as “contrary to the national interest”. Morrison, who did not provide further details on the reasons behind the decision, gave the bidders a week to re-submit their bids and address concerns over national security. 

The final decision was announced last Friday, with the Treasury confirming that the Chinese bids had been formally rejected. Baird assured that there was still plenty of interest from other parties, including from foreign investors, according to local reports. 

The 99-year lease of a 50.4 percent stake in Ausgrid had been expected to fetch more than A$10 billion ($7.64 billion; €6.74 billion). The proceeds are earmarked to fund the state's A$20 billion greenfield infrastructure pipeline, including school, hospital and road projects.  

Last November, a consortium led by Australian fund manager Hastings paid A$10.3 billion for the right to run Transgrid, valuing the network at 1.6 times its regulated base. 

NSW's poles and wires privatisation programme was launched in 2014 in a bid to unlock public capital by leasing 49 percent of the state's electricity network assets. Ausgrid is the second asset to be sold under the programme. Next on the list is the lease of 50.4 percent of Endeavour Energy.