Amid all the talk of foreign influence in Australia (read Chinese for foreign) a multi-billion dollar bid for the country’s biggest pipeline infrastructure group will yet again test the bona fides of the Turnbull government (and the ALP) on the question of investment by Chinese related companies in sensitive areas.
Two years ago, the Federal Government at the last minute halted the sale of Ausgrid, the dominant NSW electricity distributor to companies based in China and Hong Kong for security reasons. That was despite the federal government approving the sale of the port of Darwin to a Chinese buyer the year before.
Yesterday a Hong Kong-based consortium appeared on the scene with a $13 billion offer for pipeline group, APA. The $11 a share is a massive 33% above the value yesterday of $8.27.
APA securities jumped more than 20% to end at $10, well under the offer price (and the day’s high of $10.29) as investors worked out that the chances of the bid beating all the obstacles in its way look slimmer than the huge premium price would suggest with competition questions looming large in any decision.
CK Infrastructure Holdings and Power Assets Holdings are the bidders and the two companies are linked to Hong Kong’s richest man Li Ka Shing and both already own significant electricity, gas and pipeline assets in Australia.
In fact if this deal succeeds, the Hong Kong companies will be the dominant player in Australian energy related infrastructure, along with companies from china and Singapore.
Rather than security, there would seem to be competition concerns in this deal, on top of the others from this company. the ACCC will end up deciding if this deal happens.
The $7.3 billion purchase of Duet in late 2016 and early 2017 by CKI was the biggest foreign takeover in Australia, this one will top it. Treasurer Morrison waved through that deal in April 2017, but the political climate has changed since then.
“Based on the indicative price of $11 cash per stapled security, the APA board considers that it is in the best interests of APA’s security holders to engage further with the consortium,” APA said yesterday in a statement which said it was opening up its books to the bidders for due diligence.
The Hong Kong-based group claims it has already laid much of the groundwork for the bid, stating that it has had discussions with, and provided information to, both the Foreign Investment Review Board and the Australian Competition and Consumer Commission.
But there was no mention of the Critical Infrastructure Centre that the government set up after the Ausgrid debacle. It is not in Treasury where FIRB is, but is based in Peter Dutton’s more political super ministry of Home Affairs.
As part of the deal, the consortium told the ACCC it plans to divest the West Australian assets of APA’s pipeline business.“The consortium has proposed a divestment package which would include APA’s interests in the Goldfields Gas Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage Facility and a standalone management team,” APA said.
That is smart and it has to because CK Infrastructure in buying DUET picked up a major WA gas pipeline. Competition concerns have already forced that offer to be made in advance of any formal binding offer. Duet Group owns Multinet Gas, one of three Victorian gas distribution networks, and two-thirds of Victorian-based electricity distributor United Energy. It also owns the Dampier Bunbury Pipeline, a major natural gas transmission pipeline in Western Australia (hence the proposed sales in WA).
Duet’s other assets include DBP Development Group which builds, owns and operates pipelines and Energy Developments, an international group that provides clean energy and remote energy solutions.
Cheung Kong Infrastructure already owns several major infrastructure assets in Australia, including a controlling stake in South Australian electricity distributor ETSA. Cheung Kong Infrastructure and another company linked to Mr Li, Power Asset Holdings, own CHEDHA Holdings which in turn holds Citipower and Powercor in Victoria.