Australia's New South Wales state gov pressured to re-open competitive auction for Ausgrid

Top Australian funds have expressed concerns with an unsolicited 10 billion Australian dollar (7.69 billion U.S. dollar) investment proposal for Ausgrid from IFM Investors and Australian Super.

They plan to write letters to New South Wales state government, arguing taxpayers could end up with a lower price for the electricity network if the government does not go ahead with a competitive auction.

Some investors believed the NSW government is pursuing a "politically-expedient solution" by considering an unsolicited proposal composed entirely of local funds, thereby removing any chance that the Foreign Investment Review Board will block the bid, Fairfax Media reported Tuesday.

Investors say the NSW government, which needs cash to pay for infrastructure projects, is likely to get a higher value for Ausgrid if there is competitive tension among bidders, and are worried it will accept the unsolicited bid so it can do a deal as soon as possible.

"The process has been flawed," one investment group told The Australian Financial Review.

"There's a political urgency here to get an outcome."

IFM and Australian Super submitted an unsolicited proposal to buy a 50.4 percent stake in a 99-year lease of Ausgrid last week.

But some investors want the NSW government to clarify what stakes foreign investors are allowed to take in Ausgrid, which is considered a desirable, high quality asset.

Local investors that did not participate in the initial auction for Ausgrid said they could put together bids that would match IFM's and Australian Super's proposal with the help of foreign investment funds.

However, rival bids that include foreign investors may not be considered "unique" under NSW's unsolicited proposal guidelines because they would need FIRB approval.

Unsolicited proposals have to prove that they are "unique" in some way to justify the government not proceeding with a competitive auction.

Foreign investors, including American and Canadian pension funds, have been reluctant to get involved in new proposals for Ausgrid because they are worried they will be blocked by FIRB.

IFM's and Australian Super's proposal is at "stage two" of the unsolicited process, meaning the funds and the government are working together to develop a detailed proposal.

The NSW government, which has said it is still continuing preparations to "re-launch the Ausgrid transaction," plans to make a decision on the IFM and Australian Super proposal later this year.

NSW is understood to be open to receiving unsolicited proposals at any time, and its negotiations with IFM and Australian Super are not exclusive.

Some investors also claim that IFM and Australian Super have moved "opportunistically," approaching the NSW government while other funds were tied up bidding for the Port of Melbourne which sold for 9.7 billion Australian dollars (7.45 billion U.S. dollars) last week.

It was reported that the QIC Ltd-led consortium, which includes The Future Fund, Global Infrastructure Partners and Canada's Borealis Infrastructure won the 50-year lease for the Port of Melbourne.

IFM was part of a rival consortium bidding for the port but was unsuccessful.

NSW Treasurer Gladys Berejiklian has pledged to complete the Ausgrid sale before the next budget in June 2017 so the state can book the proceeds.

Shadow NSW Treasury spokesman Ryan Park has said Ausgrid should be sold at a competitive auction to maximise the price. Enditem