CK Group rejects critics of APA bid as ‘naive’

Hong Kong’s CK Group has rejected suggestions it answers to China’s ruling Communist Party as fictitious and labelled claims by some Coalition backbenchers that its $13 billion bid for APA Group will give it the power to switch off Australia’s gas supply as naive.

In a rare interview, a top executive from the global infrastructure group has defended the company’s bid for Australia’s east coast gas pipeline network in the face of growing political opposition from Canberra and national security concerns about the deal.

Andy Hunter, CKI’s deputy chief executive who is overseeing the deal, said suggestions the group founded by Hong Kong’s richest man Li Ka-shing was under China’s control were disappointing.

He said the Hong Kong stockmarket-listed company should not be put in the same category as Chinese telco Huawei, which has been blocked from bidding for 5G contracts in Australia.

Sources have told <i>The Australian Financial Review</i> that the government’s initial disposition was to block the deal.” width=”620″><figcaption>
            Sources have told <i>The Australian Financial Review</i> that the government’s initial disposition was to block the deal.</p>
<p>                <cite>Grant Phillips</cite></p>
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“We are a properly governed, publicly listed company and for anyone to suggest otherwise is sadly misinformed. The idea that we are in some way influenced by the Chinese government I have to say … let’s just leave it as … fictitious to say the least,” Mr Hunter, a Scotsman who has worked for CK Group for 30 years, said.

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“There is a broad understanding by regulators and government that a Hong Kong public company with global operations is a very, very different thing from a state-owned enterprise from the People’s Republic of China,” Mr Hunter said.

Despite growing hostility towards the deal from some Coalition backbenchers and One National leader Pauline Hanson, Mr Hunter ruled out meeting with Australian politicians opposed to the deal.

“I’m not entirely sure such a thing is too productive. Sometimes it’s more beneficial over the longer term to keep a low profile.”

The strong defence from Mr Hunter comes as China’s Ambassador to Australia, Cheng Jingye, pleaded for a fair and non-discriminatory assessment of foreign investment applications from Chinese companies.

Addressing a reception marking the 69th anniversary of the founding of the People’s Republic of China in Canberra yesterday, Mr Cheng said he wanted Australia and China to fully capitalise on the benefits of the free trade agreement between the two countries.

“China will continue to improve its investment environment welcoming more Australian companies to do business in China,” he said. “It is expected that Australia could also build a fair and non-discriminatory environment for Chinese investment.”

While the Australian Competition and Consumer Commission (ACCC) last week approved the CK/APA deal on competition grounds, it still needs to be cleared by the Foreign Investment Review Board (FIRB).

Senior sources have told The Australian Financial Review that the government’s initial disposition was to block the deal although no decision had been made. Ms Hanson said this week she would campaign against the deal if it was approved by the Coalition.

The deal, which  would give it control of almost 60 per cent of Australia’s pipelines, also faces stiff resistance from Coalition backbenchers.

Mr Hunter said some of the commentary about CK Group had been disappointing and he attacked suggestions that the company would have the power to turn off Australia’s gas supply.

“I will try and be respectful. I think that is slightly naive, I have to say. I think your government at a federal and state level is more than well-equipped to deal with the security of supply through pipelines, for example, with appropriate step-in rights as and when required,” he said by telephone from London.

“The idea that a corporate can just switch off the gas really is not well-informed. It shows a lack of understanding as to what protections are properly in place to ensure that doesn’t happen.”

It is unusual for executives from the company, run by Mr Li’s son Victor Li, to talk to the media but it is believed executives have become increasingly alarmed at the political debate surrounding Chinese investment in Australia.

In 2016, the Turnbull government blocked both CKI and Chinese state-owned enterprise State Grid from buying NSW’s electricity transmission network, Ausgrid. The bid was blocked on national security grounds with no further explanation given.

‘I still have the scars’

“I still have the scars … it was disappointing,” Mr Hunter said of the Ausgrid decision but said the company had moved on from that.

In 2017, FIRB approved a CKI bid to take over energy company DUET, giving it ownership of the Dampier, Bunbury gas pipeline in WA and gas and electricity distribution assets in Melbourne.

Mr Hunter said CK Group was respectful of the FIRB process and said he believed the government understood the differences between a Hong Kong-listed entity and a state-owned Chinese company.

He said the change of political leadership in Australia could delay the approval process but expected a decision by the end of the year. He said neither he nor Mr Li had had any direct contact with Prime Minister Scott Morrison or Treasurer Josh Frydenberg on the deal.

“There has been some upheaval in Australian politics of late that may have some bearing on the timetable but we continue to make good progress and we continue to be confident that this transaction could be concluded by the end of the year. That is our working plan.”

He said the company, which operates in 50 countries, only had about 1 per cent of its assets in China. Australia was one of its most important markets and accounted for 27 per cent of its asset value by region.

Mr Hunter would not comment on reports of a potential rival bid for APA by IFM Investors or whether CK Group would be prepared to take on Australian equity  to get a deal across the line.

The bid is already being scrutinised the Critical Infrastructure Committee (CIC), an addendum to the FIRB that was formed in February on the back of contentious foreign investment decisions involving Chinese-owned or linked companies.

“FIRB is and always has been a very thorough fact-based process. There are many capable people on the government side of the table, appropriately assessing this proposed transaction,” Mr Hunter said.

“We have submitted a very comprehensive and thoughtful proposal. Commitment to further investment in new infrastructure, divest assets to preserve competition in new projects. We are more than happy to consider regulatory oversight and transparency in the business. We have put forward a proposal we consider should be accepted.”

In his speech yesterday Mr Cheng said he hoped Australia and China remained committed to upholding the multilateral trade system and resisting protectionism, in an acknowledgement of US President Donald Trump’s decision to launch a trade war on China by lifting tariffs,

Amid complaints from the Chinese community that they felt unfairly scapegoated by the Turnbull government’s foreign interference laws, Mr Cheng said the Chinese-Australians had made a significant contribution to Australia’s economic and social development and multiculturalism.

“The Chinese community is undoubtedly an invaluable asset of the Chinese-Australian relationship which ought to be cherished,” he said.

While diplomatic tensions between Canberra and Beijing have begun to ease following a conciliatory speech from former prime minister Malcolm Turnbull last month, Mr Cheng said a sound and stable relationship between the two countries served both countries’ long-term interests as well as regional peace, stability and prosperity.

“I hope the two sides could further enhance mutual understanding, deepen political mutual trust, view each other’s development from a more comprehensive, objective and rational perspective and properly handle our differences,” he said.

Mr Cheng denied President Xi Jinping’s signature infrastructure Belt and Road Initiative amounted to a debt trap for developing nations, a “predatory quest for resources” or vehicle to create a sphere of influence. He said Australia’s cooperation on the BRI would add “new impetus” to the bilateral relationship.

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