Following the bumper sale of its TransGrid electricity transmission network, the New South Wales Government, led by Mike Baird, is now looking to partly privatize its distribution business, Ausgrid.
Ausgrid supplies power to around 1.6 million customers in Sydney, the central coast and Hunter regions—the state’s most heavily populated areas. The bid date is set for Feb 29, and the 99-year lease is for a 50.4 percent stake thought to be worth at least $12 billion including debt.
Two Chinese state companies controlled by the Chinese Communist Party are through to the indicative bidding phase—State Grid Corporation of China and China Southern Power Grid. The political implications of this have worried national security researchers, particularly given State Grid’s military and intelligence ties.
Geoff Wade, visiting fellow at Australian National University’s Crawford School of Public Policy, described China as “an expanding authoritarian state” in an interview with Epoch Times, and added that “One of its major avenues for this is buying up infrastructure—economic leverage leads to strategic leverage.”
Foreign state-owned enterprises (SOEs) have been limited from owning more than the NSW government’s own 49.6 per cent, according to the Australian Financial Review. State Grid partnered with Macquarie Infrastructure Real Assets while bidding for TransGrid, and may bid with Macquarie Capital this time, while China Southern Power Grid has teamed up with Global Infrastructure Partners.
The conditions set on foreign SOEs have not been explained, but there are three main issues that Australians should be aware of regarding the Chinese Communist Party and its SOEs.
The first is State Grid’s ties to the Communist Party and its spy agencies. For instance, one of State Grid’s subsidiaries is the China Electric Power Research Institute in Beijing, which works on areas like grid programming, and is a key tester of military enterprise products. It also researches and applies for patents with the People’s Liberation Army’s (PLA) Research Institute of Chemical Defense.
Similarly, the State Grid Electric Power Research Institute carries out joint research with the PLA’s University of Science and Technology, and provides equipment to the PLA Air Force.
A major company run by State Grid is the Nari Group based in Nanjing, which is involved with the Beidou project—China’s satellite navigation system that is on a par with GPS. Beidou has been linked with intelligence collection, and is a weapons-tracking and-targeting system.
These details and more were highlighted by Wade in an article in The Strategist, a publication of the Australian Strategic Policy Institute.
NARI’s presence in Australia has been growing; it won the bid for the Northern Sydney Substation Renovation Project from TransGrid in 2014, and has just signed a contract with the firm Jemena (of which State Grid owns 60 percent) to provide cables and overhead conductors for the next 5 years.
State Grid also uses technology from Huawei, a state-affiliated firm, which was banned from being involved with the National Broadband Network 2 years ago, based on advice from the Australian
Security Intelligence Organization
Huawei’s technology allows the creation of smart grids by putting domestic electricity meters online to produce an “Internet of energy”. Smart grids increase the threat of cyberattacks and espionage, according to several reports given to the U.S. Congress.
State Grid’s motives in expanding overseas, buying up key infrastructure and creating a global Internet of energy remain unclear, apart from the obvious profits. The fact that it has intimate links with the People’s Liberation Army is obviously a major concern.
Wade said he is concerned that too much emphasis is being placed on finding the highest bidder, and that restricting Chinese SOEs to a minority bid does not avoid the security threat.
“I would advocate that no strategic infrastructure be sold to China,” said Wade who believes a “blanket ban” is necessary to avoid China’s increased influence in South-East Asia.
“Any Chinese company will act on behalf of the state, if required,” he added, pointing out that State Grid started out as a minority shareholder in the energy infrastructure company Jemena in the Northern Territory (NT) with only a 40 percent share, but it now controls the company, which has just been chosen by the NT Government to build the $1 billion Northern Gas Pipeline between NT and Queensland.
An Expanding Empire
The State Grid Corporation of China is the world’s largest utility company, and already controls 19 percent of SP Ausnet, a Victorian power company, 41 percent of ElectraNet in South Australia, and 60 percent of Jemena in NT. It also has shares in NSW, Victorian and Australian Capital Territory gas distribution networks and transmission pipelines.
Foreign state-owned enterprises (SOEs) have been limited from owning more than the NSW government’s own 49.6 percent, according to the Australian Financial Review. State Grid partnered with Macquarie Infrastructure Real Assets while bidding for TransGrid, and may bid with Macquarie Capital this time, while China Southern Power Grid has teamed up with Global Infrastructure Partners.
State Grid has total ownership of Brazil’s national grid, and owns a significant share of the grids in Portugal, Italy and the Philippines. Last year, 16 State Grid technicians were denied visa renewals in the Philippines due to national security concerns.
Corruption in China
State Grid and China Southern Power Grid have been engaged in domestic corruption involving projects, purchases and electricity sales.
The two enterprises were inspected last February to May by the Chinese Communist Party’s graft watchdog, the Central Commission for Discipline Inspection. Company leaders were found to have sought benefits for relatives, and taken cash, luxury gifts and shopping cards from employees of subsidiaries. They also had luxurious buildings and the leaders’ office space exceeded government standards, according to Beijing-based Caixin.
A separate audit of State Grid and China Southern Power Grid the previous year in 2014, showed that more than $1 billion was misappropriated during construction of a long-distance electricity grid.
This year, Chinese leader Xi Jinping is expected to focus his anti-corruption campaign on extremely senior officials, such as former vice president Zeng Qinghong, who has links with State Grid chairman Liu Zhenya. Zeng promoted Liu to deputy manager of State Grid in 2000, and Liu returned the favour by underselling the large SOE, Shandong Luneng Group, to Zeng’s son for $600 million in 2005. It was later valued at $17.7 billion in 2007, according to Caijing, a Chinese financial magazine.
Zeng is also the right-hand man of former leader Jiang Zemin, who in 1999 initiated the persecution against Falun Gong, a spiritual practice based on the principles of truth, compassion and tolerance. Over 200,000 Falun Gong practitioners have now submitted criminal complaints against Jiang, and commentators still expect that Xi Jinping could take action against him in the future.
There are also documented allegations of human rights violations against State Grid. Many SOEs have participated in the Chinese regime’s persecution of Falun Gong to gain favor with top officials involved in the crackdown.
State Grid has taken part in monitoring, detaining and re-education of Falun Gong adherents in China, according to the website Minghui.org, which documents persecution of the practice through first-hand reports from China.
Minghui has reported over 150 cases that directly contravene international human rights law, including dismissal of staff, monitoring of staff outside work by in-house security, pressuring employees to sign promises not to practice Falun Gong, and hosting re-education facilities on company premises.
Eleven employees were persecuted to the point of mental illness or death, and another five are missing, such as an accountant called Yu Yimin, born in 1962, who was dismissed at a State Grid branch in Hubei. She was then sent to brainwashing centers three times, and administered with psychoactive drugs during 1 year of so-called re-education, which led to mental illness and her eventual death.
Although these abuses were carried out by state law-enforcement agencies, State Grid’s security departments assisted with the arrest and home searches of 39 employees. Even though State Grid has already been allowed to bid for TransGrid by the Foreign Investment Review Board and by the NSW Government, there has been no public discussion of its corruption and human rights issues.