North American bidders will not need an Australian partner to bid for Australian electricity distributor Ausgrid, an adviser on the potentially A$10 billion (US$7.46 billion) deal said, after the government rejected sole offers from Chinese interests.
Canadian funds such as Canada Pension Plan Investment Board and Borealis Infrastructure had this month been advised during a roadshow that they did not need Australian partners if they bid through a consortium, the source told Reuters.
The adviser to the New South Wales state government, which is selling the asset, requested anonymity because he is not authorised to speak publicly.
An investment banker representing interested parties said he also had heard from colleagues at the roadshow that no Australian partners were necessary for North American bidders acting through consortiums.
“It was a surprise,” he said, declining to be identified for reasons of client confidentiality.
“Everyone’s starting assumption was you needed to have domestic participation.”
Despite the guidance given on the North American roadshow, there was still significant uncertainty over what kinds of bids would be acceptable and whether the government would risk angering China by approving a majority foreign bid of any sort.
Australia last month blocked Chinese state-owned State Grid and privately-run Hong Kong firm Cheung Kong Infrastructure (1038.HK) (CKI) from bidding for a 50.4 percent controlling stake in Ausgrid, citing national security concerns.
State Grid and CKI are believed to have offered about A$13 billion for Ausgrid, the largest power network in the country.
A NSW government spokesman declined to comment on whether the state had received advice from the Foreign Investment Review Board (FIRB) on what sort of bids would be acceptable.
A spokesman for federal Treasurer Scott Morrison declined to comment on whether his office or FIRB had provided any advice to the state government.
While China is Australia’s biggest trading partner and a major investor, Canberra co-operates closely on intelligence matters with Canada and the United States. Canadian funds have participated in recent infrastructure deals in Australia including the sales of ports and rail group Asciano Ltd and transmission network operator Transgrid.
“The Chinese and others would not unreasonably ask, ‘What is going on here?’” he said.
Chinese Commerce Ministry spokesman Shen Danyang last month said the rejection of the Chinese bids was “protectionist and seriously impacts the willingness of Chinese companies to invest in Australia.”
But an investment banker said allowing North American bidders to act through a consortium would help the government justify the rejection of State Grid and CKI, who had bid alone.
Update: Borealis invests in infrastructure assets on behalf of the Ontario Municipal Employees Retirement System (OMERS) and other institutional investors.
(Reporting by Jamie Freed; Editing by Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/David Gray