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AAP Federal MPs are standing by Arthur Sinodinos after he was linked to a NSW corruption probe.

Prime Minister Tony Abbott has declared confidence in Assistant Treasurer Arthur Sinodinos, who has been drawn into a NSW anti-corruption inquiry.

The NSW Independent Commission Against Corruption has opened hearings in regard to Australian Water Holdings (AWH), a company which Senator Sinodinos joined as a director in 2008 before he entered parliament.

It is alleged the family of disgraced former Labor powerbroker Eddie Obeid bought a 30 per cent stake in AWH, after which Mr Obeid lobbied fellow NSW Labor ministers to approve a multi-million-dollar business contract between state-owned Sydney Water and AWH.

The contract would have benefited now Senator Sinodinos by up to $20 million in bonuses, the inquiry has heard.

The minister - who will appear as a witness at the inquiry in coming weeks - told parliament in February 2013 he had not been aware of Mr Obeid's involvement or that of the Obeid family when he joined the company.

He also said in that speech that he had foregone his entitlement to a shareholding in the company.

ICAC is also looking at whether the former NSW Liberal Party executive member's placement on the company board was aimed at opening lines of communication with the Liberals.

The inquiry has heard AWH charged administration costs to Sydney Water, including $75,636 in donations to the Liberal Party - which the party has decided to refund.

Mr Abbott told parliament the former chief of staff to John Howard had served the country "long and faithfully" and he stood by the minister.

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Liberals rally around Arthur Sinodinos