The government of Australia has blocked the Chinese government-owned State Grid Corporation and the Hong Kong-based Cheung Kong Infrastructure (CKI) from acquiring a controlling stake in Ausgrid, the country's largest electricity network.
Both the companies are known to have submitted separate bids worth more than A$10bn (£5.95bn; $7.71bn) in exchange for a 50.4% stake in the New South Wales electricity group. Had the deal gone through, it would have given the winner of the bid a controlling stake in Ausgrid for 99 years.
"In particular, during the review process national security issues were identified in critical power and communications services that Ausgrid provides to businesses and governments," Scott Morrison, Australia's treasurer was quoted by the Financial Times, as saying.
"I am, of course, open to considering 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," Morrison added.
Commenting on the decision, CKI said: "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 news comes at a time when Chinese companies have been acquiring various resources and power firms across the globe. Chinese investment in the US, Europe and Australia has reportedly hit record levels. However this has in turn prompted scrutiny from regulators and governments alike.
For instance, Prime Minister Theresa May recently delayed decision on the Hinkley nuclear plant amid concerns over Chinese investment. The decision had then caused frustration for the China General Nuclear Power Corporation (CGN) that was planning to contribute a third of the money required to build the plant.
In Australia too, this is not the first such instance. The government had earlier this year, blocked the sale of S Kidman & Co, the country's largest cattle rancher, to a Chinese-led group.