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CORRECTED-UPDATE 2-Australia begins sale of third power grid, restricts foreign offers
December 1, 2016 / 8:40 PM / a year ago

CORRECTED-UPDATE 2-Australia begins sale of third power grid, restricts foreign offers

(Corrects foreign investment rules from source in grafs 1 and 5, adds name of NSW Treasurer in graf 10)

* Endeavour stake expected to raise A$4 bln

* Foreign bidders restricted to owning 50 percent of the stake

* Australian govt to keep bidding conditions confidential

By Jamie Freed and Tom Westbrook

SYDNEY, Dec 2 (Reuters) - An Australian state government kicked off the A$4 billion ($2.96 billion) sale of a major stake in electricity network Endeavour Energy on Friday, with one source saying no single foreign investor will be able to own more than half of that stake.

The sale is the last of three power grid sales by New South Wales state, following the A$16.2 billion sale of Ausgrid in October to a consortium of Australian pension funds and the sale of TransGrid to an international consortium of funds for A$10.26 billion in November 2015.

The Ausgrid deal was agreed at a price lower than bids made by Chinese and Hong Kong suitors after Australia’s treasurer Scott Morrison blocked the foreign bids, citing national security concerns, a move that frustrated the bidders and spooked foreign investors.

One source familiar with the Endeavour process told Reuters that prospective bidders have been advised that no single foreign investor can own more than 50 percent of the stake.

A domestic investor must hold at least 20 percent of Endeavour, the source added, declining to be named because the talks were confidential.

Julian Leembruggen, a spokesman for Australian treasurer Scott Morrison, said foreign ownership guidelines for the transaction would be provided to bidders and not announced publicly.

The 50.4 percent stake in Endeavour, which powers parts of southern Sydney, is expected to attract bids of around A$4 billion ($3 billion).

The New South Wales government was waiting for guidance from the federal government on the treatment of foreign bidders before launching an auction process led by advisers UBS and Deutsche Bank.

On Wednesday, Western Australia state announced that its power grid, Western Power, would be sold by public float to mostly Australian investors in order to address any national security concerns about foreign ownership.

Bidding for Endeavour Energy will be open until Jan. 16, 2017, New South Wales Treasurer Gladys Berejiklian said, adding that proceeds will be spent on infrastructure.

Endeavour reported earnings before interest, tax, depreciation and amortisation of A$687 million in the financial year ended June 30, according to its annual report.

Endeavour had an estimated regulatory asset value of more than A$6 billion and an information memorandum and data room for potential bidders was prepared during the year, the report said.

$1 = 1.3493 Australian dollars Reporting by Jamie Freed and Tom Westbrook. Writing by Jane Wardell; Editing by Tom Heneghan

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