$13 billion China deal blocked

Cheung Kong Centre Hong Kong

Cheung Kong Centre Hong Kong

Mr Frydenberg's preliminary view is that the takeover was against the national interest because it would create a concentration of foreign ownership in the sector.

"I have formed this view on the grounds that it would result in an undue concentration of foreign ownership by a single company group in our most significant gas transmission business".

The Treasurer is expected to make a final decision on the A$11-a-share offer, which was launched in June, within two weeks.

The Hong Kong company past year bought Australian energy utility assets group Duet - which owns utility assets valued at $11.1 billion, including the Dampier to Bunbury gas pipeline in Western Australia, United Energy in Victoria and projects in the U.S. and UK - for $7.37 billion. New laws created to counter foreign influence were enacted this past summer, and the rhetoric eased on both sides after Turnbull was replaced as Prime Minister by Scott Morrison in August.

He described the proposed purchase of APA as being "contrary to the national interest".

"If the takeover proceeded, we'd have about 70 percent or more of electricity and gas infrastructure would be owned by either CKI, a Hong Kong company, or State Grid, a Chinese state-owned entity", Jennings said.

The Australian Competition and Consumer Commission in September gave the green light to the takeover, but the Treasurer said that decision was based on broader considerations than those studied by the competition regulator.

Asked to comment, Chinese Foreign Ministry Spokesman Lu Kang called on Australia to drop what he called its "cold war attitude," and to recognize that no one country has a sphere of influence in the region.

"The application of our foreign investment policy, expressed through my preliminary view, is not discriminatory against any investor or country", the Treasurer said.

APA was approved to buy Western Australia's pipelines last year from Duet Group last year for A$7.4 billion, and in the event of FIRB approval CK had agreed to divest its WA asset. The government rejected a bid by CK Infrastructure in 2016 for the electricity network Ausgrid, saying it would undermine national security.

Payne's visit, the first by an Australian foreign minister to China in nearly three years, was seen as marking a potential thaw in tensions in the relationship. APA shares closed on Thursday at A$9.51, compared with CK's offer price of A$11.

APA holds 56% of Australia's overall gas pipeline system, with 74% in New South Wales and Victoria, and 64% in the Northern Territory and supplies gas for power generation in all capital cities and for LNG exports. Turnbull said Australian defense and security officials determined the AUD506 million deal did not threaten national interests.