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ACCC greenlights $13 billion APA takeover by Hong Kong utility

Canberra Times logoCanberra Times 11/09/2018 Cole Latimer
The ACCC has approved the $13 billion takeover of the gas pipeline giant. © Michele Mossop The ACCC has approved the $13 billion takeover of the gas pipeline giant.

The competition watchdog has approved Hong Kong-based utility firm CKI’s $13 billion takeover bid for gas pipeline company APA.

CKI, originally known as Cheung Kong Infrastructure Holdings, and Power Assets Holdings lobbed an all-cash offer of $11 a share for the Australian gas pipeline giant in June. APA's board last month unanimously backed the offer.

The Australian Competition and Consumer Commission said on Wednesday morning it found the takeover would not impact competition in what was already a monopoly market. APA owns around two-thirds of all the major gas transmission pipelines in Australia.

“The ACCC was [initially] concerned about the removal of CKI as a competitor in relation to new pipeline development," ACCC chairman Rod Sims said. "The ACCC was also concerned about gas transmission and storage services in Western Australia given that, without the undertaking, CKI would own most gas transmission and storage facilities in the west.”

But CKI’s pre-emptive move to sell APA’s West Australian holdings, which include the Parmelia Gas Pipeline, the Goldfields Gas Pipeline, the Kalgoorlie to Kambalda pipeline and the Mondarra gas storage facility, had helped overcome these issues, he said. The buyer for these assets will still need to be approved by the ACCC.

Mr Sims said the APA takeover won't change the existing gas pipeline monopolies in any major way, as there was no competition between CKI and APA in the east.

“Concerns raised by industry participants mostly related to APA’s pre-existing dominance in gas transmission,” he said.

Next major hurdle The next major hurdle for the deal is now the Foreign Investment Review Board, which will make its decision in part guided by the Critical Infrastructure Centre of Peter Dutton’s Department of Home Affair. It will be the first major test of the newly formed unit, which provides national security advice on foreign investment proposals.

The CIC is called in by FIRB to “identify and manage national security risk to our most critical assets”. It was instituted after critical electricity network company Ausgrid was nearly sold to a Chinese conglomerate.

One of the major concerns about the takeover was the access the Hong Kong utility will gain to Australia's largely unregulated gas pipeline monopoly.

Paul Balfe, a gas expert and director at consulting firm ACIL Allen, said it was likely FIRB would also support the takeover.

"I can’t see any reason outside of xenophobia why it would be knocked back,” he said.

While there has been a push to break up APA’s monopoly position in Australia, the gas transmission market would have been poorer for it, he explained.

“APA was able to provide more of a range of gas transmission around the country than compared to if all of these assets were individually owned by groups with different interests and who had to try and collaborate on these assets,” Mr Balfe said.

However, one gas expert who declined to be named amid the political decision-making process said the rash of hardline politicking in Canberra has created uncertainty over such deals.

“We seeing a lot more decisions made on a political stance,” he said.

“Clearly they are made with a strong view to how they will play out in social media and the school of popular opinion.”

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