The Treasurer today announced that on and from 31 March 2016, the foreign investment rules will be amended so that all foreign investors need to seek and obtain prior Foreign Investment Review Board (FIRB) clearance before acquiring critical state-owned infrastructure.
The change comes following consultation with State and Territory governments after last year's 99-year lease granted over the Port of Darwin to the Chinese-based Landbridge Group. Currently, acquisitions of Australian business or land directly from the Commonwealth, a State, a Territory or a local governing body are exempt from Australia's foreign investment regime unless the acquirer is a foreign government investor. The proposed change means that private foreign entities may now also be subject to the FIRB clearance regime when acquiring critical state-owned infrastructure.
Critical state-owned infrastructure is proposed to include:
- public infrastructure (an airport or airport site; a port; infrastructure for public transport; electricity, gas, water and sewerage systems);
- existing and proposed roads;
- inter-modal transfer facilities that are part of the National Land Transport Network or are designated by a State or Territory government as significant or controlled by the Government;
- telecommunications infrastructure; and
- nuclear facilities.
The changes will be implemented by way of an amendment to the Foreign Acquisitions and Takeovers Regulation 2015 (Cth), the detail of which is yet to be seen, including as to what monetary thresholds would apply (if any) and other factors that may influence how the new rules will apply. The Treasurer has referenced a number of proposed transactions as examples of what will be covered by the new rules including the privatisation of Ausgrid (~$10 billion), Port of Melbourne (~$6 billion) and Port of Fremantle (~$1.1 billion).
A summary of the changes made to Australia's foreign investment framework in December 2015 can be found in our previous alert.