Referring to the proposal as "contrary to the national interest", Federal Treasurer Scott Morrison has made the preliminary decision to block Chinese bidders from snapping up a 99-year lease on Ausgrid.

Morrison said the decision was made due to unspecified national security considerations, and the Government had worked "very hard and collaboratively to identify possible mitigations".

The NSW government is expecting to take in more than AU$10 Billion from the lease of 50.4 percent of Ausgrid, which supplies power to more than 1.6 million homes and businesses in Sydney, Wollongong, and the Hunter region.  Ausgrid claims the largest electrical network in Australia.

"In particular, during the review process national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments," said Morrison.  "I am, of course, open to consider what the bidders put to me, but at this stage no suitable mitigations have been identified that would, for the proposed transaction structure, appropriately address the identified risks," he added.

Chinese-government owned State Grid, and Hong Kong-based Cheung Kong Infrastructure, both made bids for the 50.4 percent stake in Ausgrid late last month.  State Grid already already has stakes in South Australian and Victorian power assets, as well as gas pipelines across Australia.  Mr. Morrison did not explain why it was okay for State Grid to invest in SA but not NSW.

But he also maintains that Australia is not closing its borders:  "We remain positively disposed towards foreign investment," Morrison said.