Australia blocks foreign bids for Ausgrid

The final decision could be made next week.

Australia has blocked foreign bids for power grid Ausgrid in NSW, Australia, Citi Research said, citing a report from Bloomberg. The final decision might be made next week.

If this happens, the next sizeable acquisition opportunity for CKI and Power Assets could be gas distribution assets to be sold by National Grid in the UK in 1Q17E.

According to Bloomberg, Australia rejected bids for 50.4% stake of the electricity network Ausgrid from the two consortiums, one formed by CKI and Power Assets and the other led by State Grid Corporation from China, amid growing opposition to selling infrastructure assets to overseas investors.

Treasurer Scott Morrison from the Federal Government said that it would
be contrary to national security to allow the offers to proceed in the current form.

Bidders have been given a week to respond. The final decision will be made after seeing any revised submissions. Ausgrid supplies electricity to 1.6m household and its estimated value is over A$10bn according to Reuters.

Citi commented that whether CKI and Power Assets would be allowed to buy Ausgrid a week later seems political depending on the decision of the Australian government.

If they could not acquire Ausgrid, we think their next major acquisition target will be gas distribution assets in the UK to be sold by National Grid. The likelihood of a special dividend from Power Assets looks low as we think they would prefer to use their cash for M&A.