Australia’s stance leaves foreign investors confused
SYDNEY: Australia’s increasingly protectionist stance is dissuading Chinese and other foreign investors from bidding in major asset sales, political and corporate advisers say, potentially reducing competition and hurting prices.
The New South Wales state government’s decision last month to accept a US$12.5 billion (RM52.2 billion) offer from local pension funds for major electricity grid Ausgrid – after the federal government previously vetoed higher China and Hong Kong-based offers – has irritated some investors and their advisers. It has left them confused by an apparent change in rules that means the highest priced bid no longer wins.
The successful bid was approved without a competitive process and investment bankers involved in negotiations told Reuters it represented up to US$2.3 billion less than offers from Chinese-government owned State Grid Corp of China and Hong Kong-listed Cheung Kong Infrastructure Holdings Ltd that were both knocked back over “national security issues”.
“Did we, as a country, leave money on the table – probably,” a member of Australia’s ruling coalition told Reuters.
“But the price was more than acceptable and it can be ploughed back into the economy, fast,” said the senator, who asked not to be identified.
The Australian government is encouraging the states to sell assets by offering them up to A$5 billion in cash grants as incentives if they then quickly re-invest proceeds in infrastructure projects. Given that the payments are on offer until 2019, this may trigger a wave of sales over the next three years.
Endeavour is the next New South Wales state-owned energy asset slated for sale with a majority stake in the network that powers parts of southern Sydney expected to attract bids of around A$4 billion. The Western Australian government is also considering the possible sale of its electricity network, previously valued at A$15 billion by lobbying group Infrastructure Partnerships Australia.
A spokesman for the New South Wales government declined to comment on whether the confusion over whether foreign investors were welcome bidders was eroding future asset values. A spokesman for the Federal Treasurer also declined to comment.