"You put more conditions on it, which might offer greater protections for the consumer and the security of the nation, which may be very important to do, but that might reduce the price that they get.

"Now that may be a sensible offset to take a lower price upfront and to have the conditions that are more beneficial for consumers [in terms of] competition in the years to come and having greater conditions for national security," he told The Australian Financial Review.

The buyers are likely to be subject to Australian Energy Regulator price regulation and rules over employee numbers, which possibly could be filled by contractors.

Mr Abbott said on Monday he would like to see NSW maintain 'physical control' of the company and its infrastructure.

"I think there are ways of doing that I think you can change the ownership structure without necessarily ceding control to new owners, certainly new foreign owners, the physical control of assets," Mr Abbott told 2GB.

Mr Abbott and Mr Kelly both said they were in favour of foreign investment. "If there was ever foreign divestment in Australia then we would be in real trouble. The fact that we can pick and choose is a sign of a reasonably healthy economy," he said.

NSW Premier Mike Baird said he was prepared if the government were to block one of the bids.

"Even if [the Federal government] take a decision that they don't want any particular bidders to proceed there's a number of bidders that would be interested in these assets. They are great assets, a great opportunity," Mr Baird said.

In a highly unusual move NSW required final bids for Ausgrid even before the Federal government had given FIRB approval. This means that in theory CKI will not be able to revise its bid down if China State Grid is blocked and it no longer faces a competitor.

Blocking China State Grid could however affect NSW's plan to sell a 50.4 per cent long-term lease for Endeavour Energy, another large power grid firm, next year. Blocking China State Grid would shrink the field for that auction.

Mr Baird said the Ausgrid sale should be judged on how much cash it brought in to the NSW budget. "Matters of national interest and national security are matters for the Federal government. It's their decision. What is important is the amount of funds that become available for the infrastructure we are building."