There is growing concerns foreign ownership of vital assets in Australia could put national security at risk, after a $13 billion bid by Hong Kong’s Cheung Kong Infrastructure (CKI) for Australia’s east coast gas pipeline network has been cleared by the competition watchdog.
The move is the latest example in an ongoing series of major changes to Australia’s gas and electricity sector over the last decade, which has seen assets privatised and the majority of ownership transferred to foreign corporations.
THE CKI MACHINE IS BACK
The Mick McCormack-led APA Group, transporter of more than half the gas used across the country, has lured one of Asia’s richest family controlled firms into what would be its largest ever acquisition.
The Australian Competition and Consumer Commission (ACCC) has made the decision to approve a $13 billion sale of gas pipeline infrastructure owner APA Group to CKI this week, and is now waiting for Foreign Investment Review Board (FIRB) recommendation.
Subject to approval, the move will signify a turning point in Australian assets ownership, as CKI will now have the potential to control – with the 100% Chinese government-owned State Grid – nearly all of Australia’s east coast energy distribution assets as a result.
CKI and State Grid (which includes Singapore Power) now have a major ownership interest in all of Victoria’s electricity and distribution networks, and all gas transmission pipelines and distribution networks. They also hold a 51 per cent stake in South Australia’s electricity distributor.
The move will allow general consumer pipelines across Australia to also be in CKI’s control.
This includes the Murray Link interconnector, electricity distribution through Powercor, Citipower, United Energy and the Gasnet pipeline, plus distribution through Multinet and the Australian Gas Network.
The company is part of an empire founded by Li Ka-Shing, one of Hong Kong’s largest tycoons whose global interests span everything from property to telecommunications to ports and infrastructure.
The holding company for the conglomerate is one of Asia’s most outwardly-focused enterprises, with investments in more than 50 countries, making Ka-Shing one of the wealthiest men on Earth.
In 2016, the FIRB rejected CKI’s takeover bid for the electricity network Ausgrid, due to national security concerns.
Today, ‘experts’ have called the concerns “overblown” – with the Australian Financial Review stating “blocking CKI from buying Australian pipelines would be a win for Beijing” – citing gas assets don’t pose the same risk to national security as telecommunications and electricity assets.
This follows moves earlier this year to allow Alinta, a company owned by the Hong Kong-based Chow Tai Fook Enterprises, to buy AGL’s Liddell power station to stop its closure and ‘keep the lights on’.
The bid is also being scrutinised by the Critical Infrastructure Committee (CIC), an addendum to the FIRB that was formed in February on the back of contentious foreign investment decisions involving Chinese-owned or linked companies. This included the controversial leasing of the Port of Darwin to the Chinese-owned Landbridge Corporation.
POWER GENERATION IN AUSTRALIA
There are four parts that make up the electricity market in Australia: Generation, distribution, transmission and retail operations.
Of Australia’s eight states and territories, only three governments retain full ownership of all elements of their electricity networks: Western Australia; Tasmania; and the Northern Territory.
Queensland also owns the generation, distribution and transmission of electricity, but the retail market has been privatised.
The following is a state-by-state synopsis, excluding QLD, of the foreign entities involved in power generation, pending further expansion upon CKI approval of vital gas pipelines:
In South Australia, Cheung Kong Infrastructure and Power Assets owns a 51-per-cent share, on a 200-year lease, in SA Power Networks Electricity Distribution network.
The transmitter in that state, ElectraNet, is partly owned by State Grid Corporation — at 46.5 per cent, it holds the largest share.
New South Wales:
There are three main electricity distributors in NSW: Essential Energy, Endeavour Energy and Ausgrid. The NSW Government wants to sell half of Ausgrid to fund infrastructure projects.
There are five electricity distributors in Victoria, with three partly owned by State Grid.
State Grid owns a 20-per-cent share in AusNet Services Electricity Distribution.
It also owns 60 per cent of Jemena, the company which owns Jemena Electricity Distribution Victoria and 34 per cent of United Energy Electricity Distribution Victoria.
Cheung Kong Infrastructure owns a 51-per-cent share in both CitiPower Electricity Distribution Network Victoria and Powercor Electricity Distribution Network Victoria.
The transmission link which transports renewable energy from the Mt Mercer wind farm to the Victorian grid — Transmission Operations (Australia) Pty Ltd Victoria — is partly owned by Cheung Kong Infrastructure at a 50-per-cent share.
Australian Capital Territory:
In the ACT, the government owns 50 per cent of ActewAGL Distribution Ltd.
The other half is owned by Jemena, in which State Grid Corporate hold a 60 per cent share.
The remaining 40-per-cent share in Jemena is owned by Singapore Power International.
Former Army general and now Liberal senator Jim Molan told the Financial Review a significant number of his colleagues were concerned about the takeover bid on national security grounds. A foreign owner could cut off the gas supply at any time.
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