Citing national security concerns, the Australian government has moved to block two Chinese companies' bid to become controlling stakeholders in Ausgrid, Canberra's largest electricity distribution network.

The government's decision to block the A$10 billion-plus (US$7.7bn) sale of a controlling stake in Ausgrid to the Chinese government-owned State Grid Corporation and Hong Kong-based Cheung Kong Infrastructure (CKI) was made in the wake of political and public distrust over China's extensive investment in sensitive and critical sectors of Australia such as communication technology and electricity, among others.

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"In particular, during the review process, national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments," Australian Treasurer Scott Morrison said on Thursday.

National security risks

Morrison said that although he is open to any bids, he has to deny this particular transaction (with the Chinese companies) since he can not find any mitigating factors to address the national security risks.

He said the Australian government is still open to accepting other foreign bidders despite blocking the Chinese companies. The Australian government is offering the stake to bidders under a 99-year lease.

Morrison told reporters that State Grid and the CKI had submitted their bids of more than A$10bn for a 50 percent stake in the electricity company, which is based in New South Wales.

Local bidders

He said that no local bidders participated in the privatization process.

CKI, in a statement released to the media, said that it is not blaming the Australian government or anybody for the decision to deny its bid for Ausgrid.

"We believe that the Australian government must have reasons beyond the obvious which led them to make today's announcement. The issue is unrelated to CKI," the statement said.

A New South Wales local government spokesperson expressed optimism that the sale will push through at the right time, and the right foreign bidder will come forward. However, economists have said that with the lack of local bidders, it is likely that the sale would be delayed for some time.

TagsAustralia, Ausgrid, majority stake, State Grid Corporation, CKI, china