Federal Treasurer Scott Morrison has confirmed he has blocked the sale of the New South Wales electricity provider, Ausgrid.

Key points: Mr Morrison says prohibiting lease is inline with recommendations from the Foreign Investment Review Board

Mr Morrison says prohibiting lease is inline with recommendations from the Foreign Investment Review Board The electricity provider was being bid for by Chinese and Hong Kong investors

The electricity provider was being bid for by Chinese and Hong Kong investors NSW Treasurer Gladys Berejiklian is confident it will be sold by next budget

The Chinese Government-owned State Grid Corp and Hong Kong-listed Cheung Kong Infrastructure were both bidding for a 99-year lease of Ausgrid, which supplies power to parts of Sydney, Wollongong and the Hunter region.

Mr Morrison said stopping foreign investors from buying a 50.4 per cent lease of Ausgrid was consistent with recommendations from the Foreign Investment Review Board (FIRB).

He said the Australian Government had worked very closely with the NSW Government to ensure it was aware of these concerns, and he would continue to make sure national security requirements were met in any future sales in NSW.

He added that he supported the State Government's plan to unlock capital and fund new infrastructure.

The Treasurer said he had reviewed responses from the bidders, but said he did not believe the foreign investment should go ahead.

'There are learnings' from bid rejection, Premier says

Premier Mike Baird said he was confident the sale would go ahead, and would be a "great outcome for the people of New South Wales".

"We are very confident on the advice that we have received, that we have every opportunity to secure a successful transaction," he said.

"There are many bidders that are interested in this asset ... we are going back to the market to secure those bidders."

However, Mr Baird repeated his frustration at the timing of the rejection, saying he thought the issue should have been resolved much earlier in the process.

"I think the Federal Government will acknowledge that, I think there are learnings from that," he said.

"We want to ensure that the feedback that comes from FIRB comes very early, as much as possible, to give the clear direction.

"We are used to these sort of transactions and there are many speed bumps along the way."

Mr Baird said it was a requirement that any bid was in line with national interests.

"We don't want any bid that does not satisfy national interest and national security," he said.

"Any bid that is successful will be determined on the basis that it is good value for New South Wales taxpayers and a good partner, that satisfies national interest and national security.

"The Federal Treasurer has said he is ... open to receiving bids, whether they be domestic, international foreign investments."

Sale will be finalised by next budget: NSW Treasurer

NSW Treasurer Gladys Berejiklian would not comment on whether Ausgrid was now less valuable, but said she was sure there would be competitive tension.

"Irrespective of the outcome of today we know we have a very valuable asset, we know there is a lot of demand for that asset, and we know there are a lot of interested parties both in Australia and from other places around the world," she said.

"For major transactions of this nature there are always twists and turns along the way."

Ms Berejiklian said she was confident the Government would be banking the proceeds of an Ausgrid sale by the June budget next year.