By Jamie Freed

SYDNEY (Reuters) - Australia will weigh long-term geopolitical considerations when it vets proposals by foreigners to buy critical infrastructure assets such as power grids and ports, the government said on Tuesday.

Foreign investment in Australian infrastructure assets has become an increasingly contentious issue since the 2015 sale of the Port of Darwin to Chinese government-affiliated interests sparked a backlash over the security implications and even a rebuke from U.S. government officials.

Last month, the Australia announced the creation of a new critical infrastructure center to oversee sensitive assets.


In a discussion paper on the new body, the government said it was concerned a hostile foreign actor could deliberately disrupt supply or destroy services for strategic or economic gain, or use its leverage to influence government decision-making or policy.

"While the more extreme examples of risk are unlikely outside a significant shift in regional or global strategic relationships or imminent armed conflict, we need to account for the full range of national security risks in a way that provides flexibility to address changes in the geopolitical landscape as it evolves over time," the paper said.

The government said telecommunications, electricity, water and ports assets were the most sensitive to national security risks.

Trade, Tourism and Investment Minister Steven Ciobo told China’s top economic planner on Tuesday that the new center would provide "a high level of commercial certainty" for Chinese investors, The Australian newspaper reported.

Australia last year rejected bids from state-owned State Grid Corp of China [STGRD.UL] and publicly listed Hong Kong group Cheung Kong Infrastructure Holdings Ltd (CKI) for a large power grid, Ausgrid, citing unspecified national security concerns.

The government is now considering whether to approve a separate $5.5 billion bid from a consortium led by CKI for listed power grid and gas pipeline owner DUET Group. DUET shares were trading 11.3 percent below the offer price on Tuesday, reflecting investor concerns over whether the transaction will be approved.

Last year, federal oversight of infrastructure deals was increased after The Landbridge Group, owned by Chinese billionaire Ye Cheng, was chosen by the Northern Territory government to operate the Port of Darwin in a 99-year deal worth A$506 million.

Australia, a steadfast U.S. ally, hosts 1,250 U.S. Marines at a military base near Darwin, bolstering the American military presence close to the disputed South China Sea.

(Reporting by Jamie Freed; Editing by Lincoln Feast and Simon Cameron-Moore)

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