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Foreign Investment Review Board Decision on NSW Power Assets Sends Wrong Message

Posted on August 12, 2016 at 5:10 AM

The decision of the Australian Federal Government's Foreign Investment Review Board to disallow the partial lease of one of the New South Wales electricity networks, Ausgrid, by Chinese bidders including State Grid, sends the wrong message regarding foreign investment into Australia.

Modern Australia has been built upon foreign investment; the infrastructure needed for a geographically large but young nation has always required investment from abroad.  The long terms leases of NSW's electricity distribution assets were deliberately intended to continue this process.  The approximately AUD $20 billion raised from leasing a significant proportion of the NSW electricity distribution network companies, was to pay for improvements to the State's transport, water, power and other critical infrastructure needs, upon which economic growth would then ensue.

The NSW Government (of which I was part until April 2015), rightly encouraged bidders from around the world, in order to maximise the value of the assets in the eventual transaction.  And it was no surprise that Chinese enterprises, well-versed in the provision of electricity to large numbers of customers in a geographically large nation were amongst the bidders.  Indeed, such bids were welcomed by the NSW Government and ultimately proved to rank very highly in terms of the Government's criteria for the transaction.

Importantly, these bids required a very significant amount of time and expense, which would have been considered justified by the enterprises in view of the NSW Government's stance in encouragiing and welcoming all offshore bids.

So for the Federal Government's Foreign Investment Review Board to reject the Chinese bids at the 11th hour before contracts were signed, sends a bad message, not only to China, but to other prospective large-scale foreign investors.

If there are indeed important national security issues at stake with the Chinese bids for the NSW electricity assets, these should have been communicated to the NSW Government and the prospective bidders long before they commenced the onerous and costly process of compiling their bids.

The consequences of this lack of inter-govermental co-ordination, in terms of the Australia-China relationship, and indeed our reputation with other foreign investors, are profound, and will take some time to resolve.

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