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State Grid and Australia’s national security interests

Posted By on November 24, 2015 @ 06:00

Transgrid [1]

The State Grid Corporation of China (国家电网公司 [2]), the world’s largest electric utility [3] company, is the monopoly power distributor across China in all but five southern provinces and a behemoth with an extensive network of subsidiary companies  and subordinate research institutes.  Through this network State Grid has ties to a wide range of defence and intelligence agencies across the PRC.

State Grid recently unsuccessfully bid for the $9 billion NSW electricity transmission network TransGrid [4] in a consortium with Macquarie Infrastructure Real Assets [5]. The company’s bid was cleared by the Foreign Investment Review Board [6]

In Australia, State Grid is the largest shareholder in the non-listed ElectraNet [7] which operates the South Australian electricity transmission network and is seeking to expand its stake [8].  There are four State Grid representatives on the ElectraNet board [9],  Jiang Xiaojun (蔣曉軍), Li Lequan (李樂泉), Sun Jianxing, and Shi Xinghua. Mr Jiang, who is Senior-Vice President of State Grid International Development [10] (SGID) is  also on the board of State Grid Europe, which has been raising funds for European expansion [11], and the board of Hong Kong Electric Investment [12]. He is also a member of the company’s CPC committee [13].

State Grid has minority shareholdings in gas and electricity distributors in Victoria and NSW. In 2013, Singapore Power sold [14] almost 20 percent of listed SP AusNet [15] and 60 per cent of the shares in the unlisted SPI (Australia) Assets (branded as Jemena [16]) to State Grid Corp.  Thereby State Grid is now part-owner of Victorian electricity transmission and distribution networks, as well as Victorian, NSW and ACT gas distribution networks and transmission pipelines. The deal was valued at about $5 billion and saw Sun Jianxing [17] assume a directorship at Ausnet and Ruan Qiantu [18] (阮前途)be appointed as Deputy Managing Director of Jemena. Mr Ruan was previously involved in State Grid’s Philippines operations [19] and holds a wide range of posts in Shanghai [19].

It appears that major efforts have been made to reduce political sensitivities to PRC ownership of essential infrastructure in Australia by initially taking only partial shares in these companies. Jemena, however, has just been announced by the NT Government as the preferred bidder [20] for the $1 billion North East Gas Interconnector.

In other global holdings, State Grid has  interests in power transmission companies in the Philippines [21], Brazil [22], Italy [23] and Portugal [24]. State Grid’s international operations are pursued through SGID [25], whose CEO is Zhu Guangchao [26] (朱光超) and whose party secretary is Li Haixiang [27] (李海翔). SGID has also been involved in transmission line construction in Ethiopia [28] and hydropower construction in Cambodia [29]. Subsidiary Heilongjiang Electric Power Company [30] is developing business with Russia. Russian Grids and the State Grid are discussing the building of ultra-high voltage power transmission lines from Russia to China [31]. Other SGID businesses include global mining [32] operations.

The rise of the Chairman of the State Grid Corporation Liu Zhenya [33] (刘振亚)—was intimately tied to the support of former Politburo Standing Committee member Zeng Qinghong [34] (曾庆红) whose son, Zeng Wei, has strong Australian connections [35].

State Grid Chairman, Liu Zhenya, also heads the CPC Committee of State Grid, and all members of the company’s leadership group [36] are party members. As such they are ultimately responsible to the CPC Central Committee. Indeed the formal mission [37] of State Grid is “to serve the overall work of the party and the state” in that order.

National security concerns over State Grid development and construction of the national power grid have been most loudly voiced in the Philippines, where again only an initial 40% interest (along with four director positions [38])  in the National Grid Corporation of the Philippines (NGCP) has so far been bought by State Grid. In February this year, concerns about the State Grid technicians involved with the Philippines national grid project were expressed by the Philippines National Security Council and Department of Justice [39]. It was then announced that the work visas of 16 Chinese experts employed by the NGCP would not be renewed [40] when they expired in July 2015. State Grid have said the Philippines government’s actions were related to the ongoing South China Sea dispute between China and the Philippines rather than any in-country activities of the company.

Egypt [41] has also recently decided to end a transmission line contract with State Grid subsidiary China Electric Power Equipment and Technology Co. and assigned their own military engineers to develop it. This appears to have been the $1.8 billion deal [42] signed in March 2015.

State Grid’s networks carry the People’s Liberation Army’s communications.  In 2012, 10 members of the Information Security Bureau of the Department of Information Technology under the PLA‘s General Staff Headquarters visited State Grid headquarters [43]  to investigate the security of their networks and their information systems and the development of classified security protection regimes.

State Grid is an influential element in the development of Chinese foreign and strategic policy. In July this year, an article [44] by Hui Chunlin [45] (惠春琳), a lecturer at the Institute for International Strategic Studies [46] of the CPC Central Party School, was published on the indaa [47] website, run by State Grid-sponsored Yingda Media Group (英大传媒集团).

In the article Hui urged China, under the One Belt One Road [48] (OBOR) initiative, to expand China’s provision of electricity generation and transmission facilities to the OBOR countries in order to create a China (State Grid)-dominated “system of inter-connected and inter-operable” energy channels.  This would also include a network of ports, highways, railways and energy pipelines. According to Hui the PLA Navy would be used to “guarantee the security of the energy channels”.  These are precisely the sort of strategic investments which AIIB [49] was created to fund and to which China has managed to induce other countries to contribute.

This PRC agenda of investing in regional energy grids and economies through State Grid and other state-linked companies is being pursued with vigour. State Grid now has large energy infrastructure holdings in Australia and the Philippines and is seeking more, while the Nari Group [50] and NARI Technology [51], both subsidiaries of State Grid, are engaged in power station construction, power transmission projects, photovoltaic plants, hydropower plants, substation contracting and renovation, equipment provision and ash handling systems in the Philippines [52]Pakistan [53], Thailand, [54] Indonesia [55], Laos [56], Australia [57], Vietnam [58], Nepal [59]  and Cambodia [60]. Zha Daojiong [61] has written on how PRC energy companies abroad can manage political risk during this endeavour.  At the same time, China is buying long port leases [62] and the PLA Navy is seeking new access to ports [63] across the region.

Postscript: In correspondence with The Strategist State Grid disputed a number of claims made in a previously published version of this post. We offered State Grid the opportunity to write for The Strategist putting the company’s views in response, an offer they declined. The author has checked the facts to the best of his ability and The Strategist believes this post reflects a fair treatment of the issues raised.



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URL to article: https://www.aspistrategist.org.au/state-grid-and-australias-national-security-interests/

URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2015/11/191626478_73c756b35f_z.jpg

[2] 国家电网公司: http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&sqi=2&ved=0ahUKEwjQxumeg6jJAhXG06YKHc8TB4cQFggbMAA&url=http%3A%2F%2Fwww.sgcc.com.cn%2F&usg=AFQjCNHCLgTqg-Mxg5sHghW7ZcZBh-0FdQ&bvm=bv.108194040,d.dGY

[3] largest electric utility: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1206&MainCatID=12&id=20140531000111

[4] TransGrid: https://www.transgrid.com.au/

[5] Macquarie Infrastructure Real Assets: http://www.mirafunds.com/

[6] Foreign Investment Review Board: http://www.afr.com/business/energy/transgrid-bidders-cleared-by-firb-20151120-gl440c

[7] ElectraNet: http://www.electranet.com.au/

[8] expand its stake: http://blogs.wsj.com/dealjournalaustralia/2013/02/01/chinas-state-grid-in-talks-for-electranet-stake/

[9] ElectraNet board: http://www.electranet.com.au/corporate/governance/electranet-board/

[10] State Grid International Development: http://www.stategrid.com.cn/html/sgid/col1230000110/2013-09/17/20130917113251001387159_1.html

[11] funds for European expansion: http://www.ise.ie/debt_documents/ListingParticulars_3e9a6f62-8271-4988-b1d6-6523cd8a78b5.PDF?v=692015

[12] Hong Kong Electric Investment: https://www.hkelectric.com/en/InvestorRelations/InvestorRelations_GLNCS/Documents/2015/06012015_2.pdf

[13] company’s CPC committee: http://vip.stock.finance.sina.com.cn/corp/view/vCI_CorpManagerInfo.php?stockid=200037&Name=%BD%AF%CF%FE%BE%FC

[14] Singapore Power sold: http://www.businessspectator.com.au/article/2013/5/17/china-places-big-soft-paw-australias-grid

[15] SP AusNet: http://www.ausnetservices.com.au/

[16] Jemena: http://jemena.com.au/

[17] Sun Jianxing: http://www.ausnetservices.com.au/About+Us/Board+of+Directors.html

[18] Ruan Qiantu: http://jemena.com.au/about/about-us/leadership-team

[19] Philippines operations: http://baike.baidu.com/view/1550878.htm

[20] preferred bidder: http://www.ntnews.com.au/business/nt-government-set-to-announce-jemena-as-preferred-bidder-for-1-billion-north-east-gas-interconnector/story-fnk2tq5v-1227611965642

[21] Philippines: https://www.ihs.com/country-industry-forecasting.html?ID=106597349

[22] Brazil: http://www.bloomberg.com/news/articles/2015-07-17/china-s-state-grid-expands-in-brazil-with-belo-monte-contract

[23] Italy: http://www.cdp.it/en/media/press-releases/cdp-trasferito-il-40-9-del-capitale-di-cdp-reti-a-state-grid-e-investitori-istituzionali-italiani.html

[24] Portugal: http://www.bloomberg.com/news/articles/2012-02-02/portugal-agrees-to-sell-ren-stake-for-592-million-euros-1-

[25] SGID: http://www.stategrid.com.cn/html/sgid/col1230000130/2013-10/25/20131025152237889330462_1.html

[26] Zhu Guangchao: http://www.ren.pt/files/2015-04/2015-04-28120811_a5ab58b5-d9c7-4be7-8446-b08d2cb7044e$$bb87f445-7594-4c61-84b7-03e3b851bd3b$$d522968b-ee2f-4a89-941b-699eb1f1e698$$en_gb__Doc$$pt$$1.pdf

[27] Li Haixiang: http://www.zoominfo.com/p/Haixiang-Li/1929242634

[28] Ethiopia: http://addisfortune.net/articles/eepco-chinese-company-ink-billion-dollar-transmission-line-deal/

[29] Cambodia: http://www.sgcc.com.cn/gjhz/gjjlyhz/290913.shtml

[30] Heilongjiang Electric Power Company: http://www.chinagoabroad.com/zh/article/18139

[31] Russia to China: http://origin.www.uscc.gov/sites/default/files/Research/China%20Russia%20gas%20deal_Staffbackgrounder.pdf

[32] mining: http://www.eeo.com.cn/eeo/jjgcb/2010/03/15/165105.shtml

[33] Liu Zhenya: http://www.chinavitae.com/biography/Liu_Zhenya/career

[34] Zeng Qinghong: http://www.worldjournal.com/3303115/article-%E6%9B%BE%E6%85%B6%E7%B4%85%E5%AE%B6%E8%87%A3-%E5%9C%8B%E5%AE%B6%E9%9B%BB%E7%B6%B2%E5%8A%89%E6%8C%AF%E4%BA%9E%E8%A2%AB%E6%9F%A5/?variant=zh-cn&ref=%E6%8E%A8%E8%8D%90%E9%98%85%E8%AF%BB

[35] Australian connections: http://www.smh.com.au/world/in-thrall-of-the-empire-of-the-sons-20120525-1za2d.html

[36] members of the company’s leadership group: http://www.sgcc.com.cn/gsjs/ldcy/default.shtml

[37] formal mission: http://www.sgcc.com.cn/culture/zonglan/hxjzg/default.shtml

[38] director positions: http://www.ngcp.ph/corporate.asp?id=40

[39] Department of Justice: http://www.interaksyon.com/article/105712/doe-chief-defends-ngcp-but-admits-some-ph-govt-agencies-wary-of-chinese-experts-long-stay-in-firm

[40] not be renewed: http://thediplomat.com/2015/02/philippines-expels-china-experts-amid-south-china-sea-concerns/

[41] Egypt: https://www.facebook.com/MOICEgypt/posts/850628161651120:0

[42] $1.8 billion deal: http://egyptianstreets.com/2015/03/15/158-billion-in-foreign-investments-signed-by-egypt/

[43] visited State Grid headquarters: http://221.11.55.228/info/1013/2366.htm

[44] article: http://www.indaa.com.cn/tbdc/201507/t20150701_1609036.html

[45] Hui Chunlin: http://fangtan.people.com.cn/GB/147550/17258372.html

[46] Institute for International Strategic Studies: http://iiss.ccps.gov.cn/

[47] indaa: http://www.indaa.com.cn/

[48] One Belt One Road: https://www.chathamhouse.org/publication/twt/what-exactly-one-belt-one-road

[49] AIIB: http://www.aiib.org/

[50] Nari Group: http://www.narigroup.com/

[51] NARI Technology: http://www.naritech.cn/en/

[52] the Philippines: http://www.narigroup.com/news/cepalco-kirahon-project-in-the-philippines-completed-the-first-inverse-power-transmission.html

[53] Pakistan: http://www.narigroup.com/news/nari-entered-into-an-agreement-on-the-purchase-project-of-dry-slag-removal-equipment-of-qasim-power-plant-in-pakistan.html

[54] Thailand,: http://www.narigroup.com/news/nari-group-won-the-bid-for-the-new-substation-project-in-thailand-for-the-first-time.html

[55] Indonesia: http://www.narigroup.com/news/nari-signed-supply-agreement-on-an-indonesian-prefabricated-substation.html

[56] Laos: http://www.narigroup.com/news/nari-winning-the-bid-for-laos-nanye2-hydropower-plant-project.html

[57] Australia: http://www.narigroup.com/news/nari-won-the-bid-for-northern-sydney-substations-renovation-project.html

[58] Vietnam: http://www.naritech.cn/en/html/newsinfo.aspx?nid=214

[59] Nepal: http://www.naritech.cn/en/html/newsinfo.aspx?nid=215

[60] Cambodia: http://www.narigroup.com/news/cambodian-stung-atay-hydropower-station-was-successfully-put-into-services.html

[61] Zha Daojiong : http://opinion.hexun.com/2015-06-10/176629418.html

[62] buying long port leases: http://www.aspistrategist.org.au/landbridge-darwin-and-the-prc/

[63] new access to ports: http://www.aspistrategist.org.au/sabah-the-pla-navy-and-northern-australia/

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