Two binding bids in for Ausgrid

China’s State Grid and Hong Kong’s Cheung Kong Infrastructure are said to be the only two bidders for the electricity network's 99-year lease.

The New South Wales government has received “at least two binding bids” for the 99-year partial lease of Australia’s biggest electricity network, which might fetch up to A$14 billion ($10.52 billion; €9.56 billion). 

NSW Treasurer Gladys Berejiklian confirmed that the binding bids for the 50.4 percent stake in Ausgrid had been received, without identifying bidders. The assessment of bids will take about two weeks, providing time for the country’s Foreign Investment Review Board to assess and approve the competing offers. 

China’s State Grid and Hong Kong’s Cheung Kong Infrastructure were the only two bidders for Ausgrid, according to reports. The two companies had not responded to a request for comment at press time.

It is unclear whether local firms have taken part in the bidding. Although it is understood that the FIRB has granted permission for a foreign state-owned bidder to secure a controlling stake in Ausgrid, observers believe an absence of local bidders may raise further concerns from the regulator. 

A transaction could value the Ausgrid stake at more than A$10 billion, according to comparable valuations of other grid sales. In November, a group led by Hastings Funds Management paid A$10.3 billion for the right to run Transgrid, valuing the network at 1.6 times its regulated base.

A local press report said at least one of the bids is in the order of A$13-14 billion, based on an asset base at A$15.3 billion and a sale multiple of about 1.5 times. 

The two Chinese heavyweights are reportedly preparing presentations they have scheduled with the government and its advisors late this week. 

Since the NSW government is to retain 49.6 percent of Ausgrid, advisors say the prospective buyers' proposed business plans, forecasts and partnership structures are likely to come under intense scrutiny.