In October 2016, IFM Investors and AustralianSuper acquired a 50.4 percent stake in Ausgrid, an electricity distributor in New South Wales, on a 99-year concession. The bidders paid A$16.2 billion ($11.4 billion; €10.1 billion) in a deal investors later cited as one of the success stories of Australia’s asset recycling programme.
But the deal represented the culmination of a privatisation process that featured political interference, blocked bids and changing regulations, as we detailed in August 2016. During the competitive process for the sale of its stake in Ausgrid, the NSW government received just two binding bids: from China’s State Grid and from Hong Kong’s CK Infrastructure.
Just before the bids were received, federal treasurer Scott Morrison amended regulations so that the Foreign Investment Review Board would have to examine all strategic asset sales to foreign investors by Australian states. The Ausgrid deal was one of the first to be examined under the regulations. To the surprise of many, Morrison blocked both bids, which he said were contrary to the national interest. He added: “In particular, during the review process national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments.”
Scrutiny over the deployment of Chinese capital in Australia had intensified in 2015 when Landbridge Group secured a 99-year lease on the Port of Darwin, a strategic asset that is home to military facilities and houses visiting ships from the US.
But the Ausgrid decision was the first sign that the Australian government was willing to take a harder line on major infrastructure assets that it viewed as crucial to national security, though the perception that the country had become hostile to Chinese capital on principle was overblown.
The saga led to the establishment of the Critical Infrastructure Centre, which works alongside the FIRB to assess national security risks on sensitive assets. Its first case came in 2018, when it helped inform new treasurer Josh Frydenberg’s decision to block another CK bid – again because it was “contrary to the national interest” – this time for publicly listed East Coast gas pipeline giant APA Group.
Both decisions were made in the year before a federal election, under pressure from critics on all sides.
The original Ausgrid decision showed Australia was more willing to say no to Chinese capital, even if it was coming from Hong Kong. It was also a reminder that politics can have a chilling effect on private infrastructure investment.