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Australia to ban Chinese from leasing Sydney power grid

Australia has said it plans to block Chinese bidders from leasing a major Sydney electricity grid on national security grounds.

Treasurer Scott Morrison said Chinese state-owned State Grid Corporation and Hong Kong-registered Cheung Kong Infrastructure Group had until next Thursday to respond to his preliminary view that their leasing a 50.4% stake in Ausgrid over 99 years would not be in the national interest.

The decision almost certainly sinks the deal for the New South Wales state-owned electricity network that would have earned more than 10 billion Australian dollars (£5.8bn). The money would have been spent on Sydney rail and road infrastructure projects.

Mr Morrison would not reveal the security concerns raised by the deal.

"The issues are real, they're matters obviously of national security interest to the Commonwealth and elaborating on those obviously would not be in the national interest either," Mr Morrison said.

"When it comes to foreign investment, particularly in an asset such as this, the national security issues are paramount."

Some security analysts said a Chinese-controlled Ausgrid could become vulnerable to being shut down by cyber-attack as hackers linked to Russia had done in the Ukraine in December.

Hackers used a co-ordinated attack to take down part of western Ukraine's power grid, blacking out more than 225,000 people after hitting regional electric power distribution companies.

US officials called it the realisation of a nightmare scenario - hackers able to take down a critical system on which a country depends.

Chinese foreign investment, particularly from state-owned companies, has become increasingly contentious in Australia as Beijing takes a more aggressive stance in territorial disputes in the South China Sea.

Such investments have to be approved by Mr Morrison after investigations by the Foreign Investment Review Board establish that they are in Australia's national interests.

He has recently added emphasis to the national security aspects of that decision-making process by appointing a former spy agency chief and former defence consultant to that board.

Mr Morrison said the message from the Ausgrid decision to potential foreign investors was that Australians "have a robust process for examining foreign investment".


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