NSW Premier Mike Baird says he’s frustrated the federal government waited so long to reject two lucrative bids for the state’s electricity network.

The state government’s plans to secure $10 billion in infrastructure funds were scuppered on Thursday after federal treasurer Scott Morrison announced two Chinese bids for the 99-year lease of 50.4 per cent of Ausgrid would be knocked back due to national security concerns.

“My main frustration in this process is that I believe the decision should’ve been made much earlier,” Mr Baird told reporters in Sydney on Friday.

Labor leader Bill Shorten says the federal government needs to be clearer on what assets are not to be sold to foreign state-owned enterprises.

Treasurer Scott Morrison says national security reasons are behind a preliminary decision to block the 99-year lease of NSW electricity distributor Ausgrid to two Chinese bidders.

Mr Shorten, who has been offered a briefing on the decision, said on Friday the government should have been upfront a lot earlier in the process about what assets are sensitive.

media_camera The move is a blow to under-fire premier Mike Baird. Picture: AAP Image/Paul Miller

The federal government says the decision to block the sale of half the NSW electricity network to Chinese buyers is not based on race or politics.

Treasurer Scott Morrison has knocked back two bids from China’s State Grid and Hong Kong-listed Cheung Kong Infrastructure for a 99-year lease on 50.4 per cent of Ausgrid due to national security concerns.

“It wasn’t a decision based on the race of the bidders,” Defence Industry Minister Christopher Pyne told the Nine Network this morning.

Mr Pyne said it was a foreign investment review board decision about what was in the country’s national interest.

“We are going to make decisions that support Australia and it has nothing whatsoever to do with politics and everything to do with what’s good for our country.” The bidders will have a week to convince the government otherwise, he said.

media_camera .

Labor’s infrastructure spokesman Anthony Albanese questioned the coalition’s inconsistency.

“Chinese interests have been allowed to buy into the energy sector in Victoria and South Australia,” he said.

“But perhaps most significantly, the government sat on its hands when last year Chinese interests were able to buy Darwin Port. “If you think about a strategic national asset, that’s related to national security, I can’t think of one more significant than Darwin Port.” Mr Pyne hit back, suggesting Opposition Leader Bill Shorten would have been critical if the government made the opposite decision.

“Labor wants to have its cake and eat it too,” he said.

Morrison killed off the two surviving bids, citing national security concerns.

Mr Morrison yesterday made the shock announcement he would block the two preferred bidders, China’s State Grid and Hong Kong’s Cheung Kong Infrastructure, from buying the “poles and wires” electricity distributor after months of negotiations.

It left Mr Baird and his Treasurer Gladys Berejiklian with a potential Budget black hole of several billion dollars.

It is understood the National Security Committee was advised last week that the Chinese bids for the sale of the NSW power grid posed national security risks because of its extensive communications network.

The Daily Telegraph was told intelligence agencies briefed the NSCC meeting on their concerns about Ausgrid’s infrastructure and vital links to defence and other strategic assets.

Just as critical to the interim decision by Mr Morrison was the NSW government’s sale process to offer “control” of the $8 billion asset rather than simply passive ownership.

Mr Morrison yesterday would not comment on the precise national security issues but said there was nothing that could be conceived to “mitigate” such concerns.

Former ASIO boss David Irvine, appointed to the Foreign Investment Review Board last year, is believed to have advised against the sale on national security grounds.

State Grid was rumoured to be offering up to $14 billion for the 99-year lease of 50.4 per cent of Ausgrid.

The NSW government is now expected to go back to the drawing board. Other bidders are more likely to be around the $10 billion mark.

Mr Morrison said neither of the companies had properly addressed national security risks: “During the review process (involving the FIRB) ­national security issues were identified in critical power and communications services Ausgrid provides to businesses and governments.’’

media_camera Premier Mike Baird / Picture: Adam Taylor

Mr Morrison has given both companies until Thursday to make further submissions on fixing security risks.

The NSW government was stunned by the decision, which came despite State Grid and CKI having investments in gas and power companies across Australia. CKI owns 51 per cent of the South Australian electricity network.

“The federal government and its agencies had given us every indication ... that (Stategrid and CKI) could continue,” Ms Berejiklian said.

Mr Baird reassured the public the government’s election commitments of more $20 billion in infrastructure projects would still go ahead.

The government has reaped more than $10 billion from leasing Transgrid and has the leasing of 50.4 per cent of Endeavour Energy to come.

During the 2015 state election campaign Opposition Leader Luke Foley raised ­national security concerns about selling to Chinese companies, and the government accused him of being a racist.

“When I raised questions about this in the final week of the election campaign Mr Baird sent out his attack dogs to call me a racist. Is he calling Scott Morrison a racist today?” Mr Foley said.

— with AAP

LIBERALS GO QUIET ON RACIST CLAIMS

COMMENT Andrew Clennell

TREASURER Gladys Berejiklian’s colleagues spent the 2015 election campaign calling Labor leader Luke Foley a “racist” for suggesting there could be any problem with the Chinese owning our “poles and wires”.

Raising the Chinese issue was an attempt by Foley to fearmonger and win votes. And it worked on the Central Coast, where Labor won three seats.

Under the logic of her government’s racist tag for Foley, Berejiklian ought to have been calling Federal Treasurer Scott Morrison the same thing yesterday. But, of course, she wasn’t. She chose to toe the Liberal Party line rather than criticise Morrison.

Yet the state government made the point that the Foreign Investment Review Board had indicated to bidders ownership would not be an issue.

The Feds led the government to believe in December there would not be a problem with the Chinese and that they could go for broke on cash.

media_camera Mike Baird and Gladys Berejiklian in Question Time yesterday / Picture: Carly Earl

Ultimately, after a narrow election loss, Morrison has pulled the rug from under his NSW Liberal colleagues.

And Berejiklian has to cop some blame. She ran a process where there were no bidders other than those from Hong Kong and China in the list of preferred tenderers.

Had she kept other bidders in the process, the decision by Morrison and the FIRB yesterday easily could have been segued into a competitor winning and NSW would be grabbing its cash.

Instead, the Treasurer will have to bugger around with Ausgrid for another six months until a sale.

Ultimately, this should not cost NSW any projects. The government promised to reap $20 billion from electricity sale proceeds and has already got more than $10 billion from Transgrid. It will probably be a matter of getting $10 billion from the partial sale of Ausgrid instead of $14 billion.

Yesterday was the last thing the Baird government needed when it is already fighting on so many fronts — over the death of a baby at a hospital, cancer patients being mistreated and the controversial decision to shut the greyhound industry.

media_camera The NSW government is now expected to go back to the drawing board. Other bidders are more likely to be around the $10 billion mark.

THE COUNTRY’S SAFETY MUST OVERRIDE BAIRD’S BALANCE SHEET

COMMENT Simon Benson

SCOTT Morrison made the only decision available to him.

National security overrides every other concern, including Mike Baird’s balance sheet.

But this was just the end point in an exhaustive process, not the basis on which the bid was assessed.

This is important for people to understand before conclusions are drawn about how foreign investment decisions are made, particularly when it comes to China.

Australia has been built on foreign investment. Our economy would look vastly different without it. Bleak to say the least. We have also been involved in an evolution of engagement with China that started in the early 70s and has grown to become one of our most important trading relationships.

But decisions on investment must always be weighed against strategic and national security interests.

And this means constantly reassessing the regional security environment and keeping pace with rapidly evolving technology.

Even on the surface, the sale of such a critical piece of infrastructure as a power grid would and should raise national interest alarm bells.

As Morrison hinted yesterday, there appeared little prospect of being able to proceed with a foreign sale and mitigate against the national security risks at the same time.

The issue of China presumably takes the decision to another level.

Its behaviour in cyber space and espionage is an issue for concern. Its aggressive behaviour in the South China Sea is another. We have alliances with the US and our Five Eyes partners that transcend investment.

media_camera Cartoonist Warren Brown’s view.

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Originally published as Baird frustrated by Morrison’s power block