Australia to ban Chinese from leasing Sydney power grid

transmission power line elp

CANBERRA, Australia (AP) — Australia announced on Thursday it plans to block Chinese bidders from leasing a major Sydney power grid on national security grounds.

Treasurer Scott Morrison said Chinese state-owned State Grid Corp. and Hong Kong-registered Cheung Kong Infrastructure Group had until next Thursday to respond to his preliminary view that their leasing a 50.4 percent stake in Ausgrid over 99 years would not be in the national interest.

The decision almost certainly sinks the deal for the New South Wales state-owned electricity network that would have earned more than $7.6 billion. The money would have been spent on Sydney rail and road infrastructure projects.

Morrison declined to detail the security issues raised by the deal.

"The issues are real, they're matters obviously of national security interest to the Commonwealth and elaborating on those obviously would not be in the national interest either," Morrison told reporters.

"When it comes to foreign investment, particularly in an asset such as this, the national security issues are paramount," he said.

China's state-run Xinhua News Agency criticized the decision by Australia and a move by Britain to delay a decision on a new nuclear power plant backed by Chinese investment. It said that although China's "dramatic development, huge population and unique culture" may cause concern for some countries, it could also result in "China-phobia."

"To suggest that China would try to kidnap the countries' electricity network for ulterior motive is absurd and almost comical, since it is widely recognized in the world that business reputation is critical to any corporate activity," Xinhua said.

"It's also ridiculous to suggest that Chinese enterprises would risk their credit and commit suicide on the world stage by threatening to deny the Australian and British public electricity," it added.

Some security analysts said a Chinese-controlled Ausgrid could become vulnerable to being shut down by cyberattack as hackers linked to Russia had done in the Ukraine in December.

Hackers used a coordinated attack to take down part of western Ukraine's power grid, blacking out more than 225,000 people after hitting regional electric power distribution companies. U.S. officials called it the realization of a nightmare scenario — hackers able to take down a critical system on which a country depends.

Chinese foreign investment, particularly from state-owned companies, has become increasingly contentious in Australia as China takes a more aggressive stance in territorial disputes in the South China Sea.

Such investments have to be approved by Morrison after investigations by the Foreign Investment Review Board establish that they are in Australia's national interests.

He has recently added emphasis to the national security aspects of that decision-making process by appointing a former spy agency chief and former defense consultant to that board.

Morrison said the message from the Ausgrid decision to potential foreign investors was that Australians "have a robust process for examining foreign investment."

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