Australia Likely to Block Hong Kong Company’s Bid for Gas Pipeline
Posted November 7, 2018 12:18 p.m. EST
SYDNEY — Li Ka-shing may be one of the most influential businessmen in Asia, but that reputation — and fear of Chinese influence — is working against his company’s ambitions to buy a critical gas operation in Australia.
The Australian government, seeking to balance national security interests and economic growth, said Wednesday that it was likely to block CK Group, a company led by Li, a Hong Kong billionaire, from acquiring APA Group, the country’s largest gas and pipeline company. A final decision is expected in two weeks, according to a Treasury statement.
In February, Australia’s Treasury announced it was tightening rules on investments in electricity and agriculture because of questions about China’s influence on such deals. As much as $90 billion in Chinese investment has flowed to Australia since 2007.
Australia’s treasurer, Josh Frydenberg, said his “preliminary view” of CK Group’s bid of 12.98 billion Australian dollars ($9.6 billion) was to turn it down because it “would be contrary to the national interest.”
“I have formed this view on the grounds that it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business,” Frydenberg said in a statement.
CK Group said in a separate statement that “the preliminary view is not an adverse reflection on the CK Group, and that the Australian Government welcomes CK Group’s investments in Australia and its broader contribution to the Australian economy.”
Li’s companies already have substantial interests in Australia, but their attempts at acquiring utilities have had mixed results. The Australian government cleared the group’s takeover of gas and electricity distributor Duet Group in 2017; a year earlier it had blocked a joint bid for a state electricity distributor.
This year, as the bid for the gas pipeline was under review and scrutiny over foreign acquisitions increased, CK Group attempted to allay concerns about the Chinese government’s influence.
Andy Hunter, CK’s deputy chief executive, called the criticism and the concern about foreign investment as misinformed and disappointing.
“We are a properly governed, publicly-listed company and for anyone to suggest otherwise is sadly misinformed. The idea that we are in some way influenced by the Chinese government,” Hunter told the Australian Financial Review in September, was “fictitious to say the least.”
The bid was cleared by the Australian competition watchdog but needed approval from by the Foreign Investment Review Board and the Treasurer.
The review board was unable to reach a unanimous recommendation, according to Frydenberg’s statement. While the competition watchdog approved the bid, it hadn’t considered “the concentration of foreign ownership.”
Frydenberg said that APA Group’s size, which accounts for 15,000 kilometers (9,320 miles) of pipelines, representing 56 percent of Australia’s gas pipeline transmission system, was among his biggest concerns regarding the bid. The operation also includes three-quarters of all pipeline along the country’s eastern coast.
The news comes as the Australian government embarks on a campaign to revitalize relations with Beijing that have been strained since June when the government of former Prime Minister Malcolm Turnbull passed national security legislation that bans foreign interference in politics.
Government officials said at the time that the law was not aimed at any single country but the decision came months after newly released Australian electoral returns showed businesses with links to China had donated hundreds of thousands of dollars to political parties in 2016.
In August, the Australian government blocked Chinese technology giant Huawei and another Chinese company, ZTE, from providing equipment to support the country’s new telecommunications networks. Government ministers said at the time that companies that “are likely to be subject to extrajudicial directions from a foreign government” posed unacceptable security risks.