‘National security concern’: Australia blocks $10 billion sale of hydro grid to China after espionage charge laid

Jonathan Pearlman, The Telegraph | August 12, 2016 9:52 AM ET

EDF ENGERYA computer generated image of the proposed two nuclear reactors, Hinkely Point C , at the Hinkley Point power plant in south-west England.

SYDNEY — Australia has blocked a $10 billion deal to lease its biggest electricity grid to Chinese and Hong Kong investors because of “national security” after Britain’s decision to delay the Hinkley Point nuclear power station project.

The Australian move comes as U.S. authorities laid espionage charges against China General Nuclear Power, the state company which would have a one third stake in the Hinkley Point project.

U.K. prime minister Theresa May has delayed a final decision on whether to allow this construction to go ahead amid concerns that China’s involvement could threaten British national security.

The U.S. justice department has accused Allen Ho, a CGN engineer based in America, of conspiring with the firm to steal secret technology from the American nuclear power industry. The alleged conspiracy lasted for almost 20 years, from 1997 until April this year.

AP Photo/Rob GriffithAustralia's Treasurer Scott Morrison on Friday rejected accusations that the reason the government plans to ban Chinese bidders from leasing a Sydney electricity grid is to appease influential lawmakers with xenophobic views.

In Australia, the government expressed concern about the security risk posed by a plan for two bidders – one from Hong Kong, the other from mainland China – to take a 50.4 per cent stake in Ausgrid, the main electricity network in New South Wales, the nation’s largest state. The network serves 1.6 million homes and businesses in Sydney and beyond.

Scott Morrison, the Australian finance minister, noted that the grid covers the “critical” supply of power and communications to businesses and government.

“The national security concerns are not country specific and relate to the transaction structure and the nature of the assets,” he said. Asked about the specific risks posed to national security, Morrison replied: “The only person who is security cleared in this room to be able to hear the answer to that question is me.”

The bidders for the network are understood to be State Grid Corporation, a Chinese company, and Cheung Kong Infrastructure, owned by the Hong Kong billionaire, Li Ka-shing.

Some experts believe that handing control of the network to Chinese entities would increase the risk of cyber attacks and electronic espionage.

Australia has taken a series of steps to block investment from China. The government has twice prevented Chinese bidders from buying the S. Kidman pastoral estate, one of the largest private landholdings in the world.

Australia has also criticized China’s territorial ambitions in the South China Sea, where the country has asserted its claim to a vast area of ocean by building artificial islands, in defiance of a ruling from a court in The Hague.

The Hinkley Point project would supply seven per cent of Britain’s electricity. CGN, the Chinese company, would cover $10 billion of the total $30 billion construction cost.

However, the case against CGN in the U.S. raises the possibility that the new power station could be completed with the aid of stolen American technology.

The U.S. justice department indictment makes clear that CGN is under the “direct control” of the state council, described as the “highest government authority” in Beijing. Instead of being a normal commercial enterprise, the CGN is regarded as one arm of Chinese foreign policy.