Australia has blocked the sale of the New South Wales electricity provider, Ausgrid to two Chinese companies citing security concerns.

Australian Treasurer Scott Morrison has prohibited Chinese state owned company State Grid and Hong Kong-based Cheung Kong Infrastructure Holdings from buying 50.4% stake in Ausgrid, saying that it would go against national interest.

Both the companies were proposing to take Ausgrid, country’s largest electricity network under 99 year lease, which supplies electricity in parts of Sydney, Wollongong and the Hunter region.

Morrison said: “I have today made an order under the Foreign Acquisitions and Takeovers Act 1975 (the Act) prohibiting the proposed acquisition by foreign investors for the lease of 50.4 per cent of Ausgrid, the New South Wales electricity distribution network.

“After due consideration of responses from bidders to my preliminary view of 11 August 2016, I have decided that the acquisition by foreign investors under the current proposed structure of the lease of 50.4 per cent of Ausgrid, the New South Wales electricity distribution network, would be contrary to the national interest.

“In making this decision, national interest concerns have been paramount. They relate to the transaction structure as currently proposed and the nature of the assets.”

Following the rejection of the Chinese companies, New South Wales (NSW) will now have to start a bidding process afresh to sell majority stake to local companies.

NSW Premier Mike Baird said: "The NSW Government will now move immediately to relaunch the transaction process for the partial lease of Ausgrid and notes the strong market interest for this valuable asset."

Following the setback, China Commerce Ministry spokesman Shen Danyang was quoted by BBC as saying: "This kind of decision is protectionist and seriously impacts the willingness of Chinese companies to invest in Australia."

New South Wales Government was planning to sell majority stake in Ausgrid to unlock capital to fund investment in new infrastructure across the state.

Morrison said that the Australian government supports New South Wales Government’s plan to attract foreign investment but it should not be contrary to national interest.


Image: Ausgrid supplies electricity in parts of Sydney, Wollongong and the Hunter region. Photo coutesy of Sardaka (talk)/Wiki.