December 19, 2013 / 10:15 PM / 5 years ago

Australian government approves China's $4.4 bln power sector purchase

SYDNEY, Dec 20 (Reuters) - The Australian government has approved the purchase of stakes worth as much as A$5 billion ($4.4 billion)in the country’s power companies by State Grid Corp of China (SGCC), the world’s largest state utility.

Treasurer Joe Hockey on Friday gave the greenlight to State Grid’s purchase of 19 percent of electricity supplier SP Ausnet , and 60 percent of energy infrastructure company SPI (Australia) Assets Pty Ltd (SPIAA).

The approval comes just weeks after the Treasurer blocked the A$2.8 billion takeover of GrainCorp by U.S. agribusiness giant Archer Daniels Midland (ADM), citing national interest.

Lawyers and bankers who work in mergers and acquisitions warned that decision was likely to spook some international investors who already view Australia as a tough place to do business.

“Australia is open for business and we welcome foreign investment when it is not contrary to the national interest,” Hockey said in a statement on Friday.

State Grid has been building its presence in the Australian energy sector, buying a 41 percent stake in unlisted South Australian electricity supplier ElectraNet from the Queensland state government’s Powerlink last year.

As a condition of approval for the latest deals, at least 50 percent of the new board members to be appointed to SP AusNet and SPIAA must be resident in Australia.

SP AusNet, listed in Australia and Singapore, owns and operates electricity and gas distribution assets in Victoria state, including the state-wide electricity transmission network. SPI will continue to hold a 31.1 percent stake in SP AusNet and SP AusNet will remain publicly listed. SPIAA, which uses the trading name Jemena, owns electricity and gas distribution networks.

State Grid announced in May it was purchasing the stakes from a unit of Singapore’s Temasek. Financial terms were not disclosed, but Reuters calculations put the value at more than A$5 billion including debt.

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