FIRB must block the Santos takeover to prevent national suicide

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Via Domainfax:

Santos’s Chinese shareholder is understood to be in talks with suitor Harbour Energy to retain a major stake in the Australian oil and gas producer if Harbour’s $13.5 billion bid succeeds.

ENN, which holds 10.1 per cent of Santos, made it clear on Monday night it was not interested in a cash offer for its shares. However, it is understood the group is open to a deal with Harbour that would allow it to retain exposure to Santos’ assets.

…Following Harbour’s latest offer, major shareholder ENN – one of the largest private companies in China and which holds 10.07 per cent of Santos – said it would be open to speaking to Harbour although indicated it wants to maintain exposure to Santos’s assets.

“Santos is an important part of the company’s long-term strategy for clean energy. At present, there is no intention to sell shares in exchange for cash,” ENN said in a company statement on the Shanghai exchange.

Australia’s only sell side energy analyst with a brain, Mark Samter of Credit Suisse, wrote a couple of days ago:

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So, what we confront here is truly disastrous. STO is the core of the east coast gas cartel. More than any other firm it lied about having enough feed-stock for its QLD LNG plant and today it relies most heavily on third party purchases to fulfill its contract obligations to customers, creating the local shortage of gas driving power price spikes and carbon policy chaos. It is therefore the key price-setter in both east coast gas and electricity markets.

There are three points for FIRB and Treasurer Morrison to consider:

  • Will handing this set of assets into foreign-ownership add another serious layer of complication to unwinding the collapse of the east coast energy market? Yes.
  • Is it generally a good idea to allow customers to own large slabs of production? No.
  • Is it a good idea for Chinese entities to control pricing in the failed east coast gas and electricity markets? No.
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This deal is as close to national suicide as you can get without putting the gun to your head and pulling the trigger yourself.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.