Australian state frustrated at government's delayed Ausgrid decision

The New South Wales state was frustrated as the Australian government waited until the last minute to block two bids for electricity distributor Ausgrid, saying it could have been made much earlier in the bidding process.

Australia has knocked back the sale of its largest energy grid to China's State Grid Corp and Hong Kong listed Cheung Kong Infrastructure Holdings, citing national security concerns, giving the companies one week to amend their bids to mitigate risks.

New South Wales state Premier Mike Baird on Friday criticized the government's handling of the decision, only reinforcing the business community's attitude to Australia's opaque foreign investment process.

"My main frustration in this process is that I believe the decision should've been made much earlier," Baird told reporters.

"There were a number of milestones along the way. I think there was an opportunity to deal with this many months ago."

New South Wales (NSW) state has been recycling state-owned assets to pay for much-needed transport infrastructure and capital works, with the 50.4-percent sale of state-owned electricity infrastructure company Ausgrid expected to fetch north of 11 billion Australian dollars (8,37 billion U.S. dollars).

The NSW government would remain a 49.6-percent shareholder of the asset which would come under a 99-year lease.

Early in the bidding process, Foreign Investment Review Board (FIRB) chief Brian Wilson phoned all potential bidders of the lucrative asset, including the two final bidders to inform them there were no restrictions in the bidding process, News Corp reported.

This led to the withdrawal from other local and foreign-based bidders who felt they would not be able to compete against the Chinese bids, News Corp said.

On this basis NSW took the unusual step to accept binding bids on condition of FIRB approval on June 25 to keep its asset-recycling scheme proceeding to the proscribed timeline, confident both would pass the crucial hurdle. Rural electricity provider Endeavour Energy is the last the trio of "poles and wires" sales.

But scrutiny over direct foreign investment into Australia has been intensified following an inflamed internal political debate surrounding the partial lease of the Port of Darwin to China's Landbridge Group in November 2015.

Australian Prime Minister Malcolm Turnbull was publicly derided by U.S. President Barack Obama over the issue, causing Treasurer Scott Morrison rushed to the cameras claiming foreign investment rules would be reviewed. Australia houses a rotating deployment of U.S. Marines in Darwin.

On the same day, Morrison declared Australia's largest cattle ranch, S. Kidman & Co, could not be sold to a foreign bidder, citing Australia's national interest due to a nearby weapons testing range. The two bidders at the pointy end of negotiations were both Chinese who see the potential of Australia's agriculture industry and were prepared to pay upwards of 350 million Australian dollars (266 million U.S. dollars) for the ranch.

Morrison again knocked back the Kidman sale in April to a consortium of Australian Rural Capital and China's Dakang in April, claiming it was against the national interest despite properties near the sensitive Woomera defence testing range being taken out. Other agricultural assets however have since have been sold to Chinese investors without worry.

The FIRB has also previously approved investments by China's State Grid Corp for major holdings of Australian electricity in Victoria and South Australia as well as gas transmission and distribution in NSW, Victoria and the Australia Capital Territory (ACT).

Former Australian foreign minister Bob Carr claimed the rejection of both Chinese bids was a policy sacrifice to the "Witches' Sabbath of xenophobia and economic nationalism stirred up at the recent Federal election."

"(Morrison's) statement refers not to FIRB advice but to the review process," Carr, who is the director of the Australia China Relations Institute, said on Thursday.

"Does this mean that his decision is not based on the analysis of FIRB, but has been arrived at in his own office?"

Morrison's decision has been widely viewed as a bid to appease the newly-elected protectionist bloc in Australia's upper house, a group the ruling government needs to help push its controversial domestic agenda, including tens of billions of dollars in stalled budget cuts dating back to 2014.

"That is crap. It is complete crap," Morrison told local radio broadcaster 5AA on Friday.

"I make these decisions based on the serious considerations of the national security information that is presented to me."

NSW is confident that their infrastructure strategy will be impacted and expects the sale proceeds to be added into state coffers by June 30, 2017, though should the two bids not pass final judgement, it would likely come at a discount.

"This is a very valuable asset with a lot of interest," NSW Treasurer Gladys Berejiklian told reporters on Thursday following Morrison's decision, though would not elaborate on any other potential bidder. Endit