China Investment Corp.'s low-profile participation in the recently announced $7.3 billion winning bid for Port of Melbourne points to the balancing act facing Chinese investors and the governments of countries in which those investors are ramping up allocations.
Strictly as a matter of capital deployed, the $810 billion Beijing-based sovereign wealth fund stands in the first ranks of the deal's stakeholders — committing roughly the same 20% share of the total as Australia's A$122.8 billion ($92 billion) Future Fund, Melbourne, and the C$77 billion ($58.3 billion) Ontario Municipal Employees Retirement System, Toronto.
However, one month after Australia's government nixed a bid by Chinese investors — led by State Grid Corp. of China — for a controlling 50.4% interest in electricity distribution network Ausgrid on national security grounds, all parties to the Port of Melbourne transaction appear willing to play down the Chinese role.
Against that backdrop, one industry veteran familiar with the bidding process, who declined to be named, said CIC officials “were specifically encouraged to be at a certain level that wouldn't be an issue” for the winning consortium.
There was no mention of the CIC in separate news releases announcing the deal on Sept. 19 by Melbourne's Victoria state government and the winning consortium of Future Fund, OMERS, Brisbane-based money manager QIC and New York-based Global Infrastructure Partners. News of CIC's involvement was broken later that day by Victoria state Treasurer Tim Pallas. Mr. Pallas couldn't be reached for further comment.
With CIC opting to get its exposure through Global Infrastructure Partners' Australia fund, the Chinese sovereign wealth fund will have less influence than a full-fledged member of the consortium, noted one veteran infrastructure manager in Melbourne, who declined to be named.
CIC spokesmen didn't respond immediately to e-mails seeking comment.
It remains to be seen whether CIC's low-key success in snaring a minority stake in Australia's biggest port will smooth the Chinese feathers ruffled by the Australian central government's Ausgrid intervention. Following Australian Treasurer Scott Morrison's official decision Aug. 19 to short-circuit State Grid's bid, Sun Jiwen, a Beijing-based spokesman for China's Ministry of Commerce, said on the ministry's website that while China respects the right of countries to take national security into consideration, Australia's intervention in “the final stage of open bidding” would discourage Chinese investment in the country, negatively affecting bilateral trade and economic relations.
Mr. Sun could not be reached for further comment.
In a Sept. 23 interview, Helen Sawczak, the Melbourne-based CEO of the Australia China Business Council, said that with the bidding process facing foreign investors in big transactions such as Ausgrid or the Port of Melbourne costing millions of dollars, any lack of clarity in how bids are run could prove a deterrent.
“Hopefully, the success of (the Port of Melbourne) sale will be a signal to Chinese investors that every sale and every bid will be examined on its merits and with due process,” she said.
Australia's openness to Chinese investors looks set to continue to depend on the details.