China&#39;s majority bid of UK&#39;s National Grid restocks security fears

Chinese companies Fosun and China Gas are thought to be considering a consortium offer for a controlling stake in National Grid's gas distribution network, which supplies gas to around 10.9 million customers and is the subject of an £11bn auction. The move comes less than a week after UK Prime Minister Theresa May announced that foreign investment in Britain's infrastructure will face tighter regulation, following approval of the France and China-backed nuclear plant at Hinkley Point. A stake of at least 51% is on offer for National Grid's pipeline business. Tory MP John Redwood warns "there could be security concerns, but my main concern is that this is not a fair market," adding that the UK "have been far too generous in the past." Liberal Democrat leader Tim Farron believes the government is not "considering whether it is in our long-term national interest."

A new row over Chinese investment broke out last night after it emerged that one of the country’s firms is bidding to take control of half of Britain’s gas pipelines.

State-owned operator China Gas has joined with Shanghai-based investment firm Fosun to bid for a majority stake in the National Grid’s £11 billion gas distribution business.

It operates four gas distribution pipelines that supply an estimated 11 million homes and businesses in the Midlands, the North West, eastern England and north London. The Chinese consortium is one of three trying to buy a controlling stake.

Scroll down for video

Prime Minister Theresa May holds a meeting with Chinese President Xi Jinping earlier this month

At the time, a source reportedly said: ‘The only time it drops off is during Chinese New Year.’ Yesterday, Tory MP John Redwood said the UK was being far too generous to countries such as China – and demanded government intervention to stop state monopolies buying up our industries.

He said the Government needed to be much ‘firmer’; likening the situation to the failure to stop the Stock Exchange being taken over by the Germans.

‘There could be security concerns, but my main concern is that this is not a fair market,’ he said. ‘I have suggested to the Government that they should amend the competition rules to allow intervention if the bidder is a foreign government or is a foreign nationalised industry.

‘This is on the grounds that Britain cannot do the same and invest in their industries like this. As I understand it, there is a lot of Chinese state money behind this potential deal. They do not allow us to invest in their economy in the same way. We have been far too generous in the past.’

National Grid has decided to carve out the gas operations into a stand-alone business. It is selling its pipelines so it can focus on more profitable parts of its business.

HOW CHINA IS BUYING UP BRITAIN The National Grid’s Gas Distribution network controls almost half the pipelines delivering gas to Britain’s homes, serving 10.9million customers. It covers north London, eastern England, the North West and the West Midlands. The Chinese consortium is believed to include the Shanghai-based conglomerate Fosun and the state owned China Gas. It is believed to be advised by Goldman Sachs. Two other packs of international investors are also expected to take part in the auction, with bids due in later this month. The winning bid will have to be approved by Ofgem and the government. China Investment Corporation also owns a 10 per cent state in Thames Water, Britain’s biggest water utility. A Chinese state-controlled oil company now runs two of the largest oilfields in the North Sea. Advertisement !- - ad: https://mads.dailymail.co.uk/v8/ru/news/none/article/other/mpu_factbox.html?id=mpu_factbox_1 - ->

While the gas itself is owned by the various energy companies, National Grid is responsible for it while it is being transported.

Liberal Democrat leader Tim Farron said: ‘This government is getting it completely wrong when it comes to energy security.

‘Instead of working with our allies to develop sustainable, low-cost energy solutions, we are offering up our ageing systems based on fossil fuels to the highest bidder, without considering whether it is in our long-term national interest.’

National Grid said: ‘We will not speculate on the identity of potential bidders. Regardless of their identity, all bidders will have to go through the same rigorous approval process. The new owner will have to be approved by regulators and operate under the relevant requirements.

‘Networks are subject to strict rules and criteria in terms of security, reliability and availability and any buyer will need to prove to Ofgem and the Government that they can meet these criteria.’ Government sources said the deal would be subject to the additional safeguards that Mrs May put in place following the Hinkley decision.

A No 10 spokesman said: ‘We have a robust regulatory system in place, and any inward investment must meet the relevant legal and regulatory standards and requirements.

‘The additional safeguards proposed last week mean that in future there will be a formal gateway through which investments in critical infrastructure are interrogated for their implications for national security.’

The second bid for the pipelines is led by the Canada Pension Plan Investment Board, and the third by Australian bank Macquarie and another Chinese player – China Investment Corporation.