The NSW state government announced on Thursday it had sold a 50.4 per cent stake in Ausgrid to two local superannuation funds in a deal valuing the entire company, including debt, at about $20.8 billion. Two months earlier, the federal government barred NSW from accepting an offer from State Grid Corp. of China that was said to value the power network at about $25.1 billion, citing national security concerns.

The difference shows the cost to the nation of limiting ownership of sensitive infrastructure to local buyers, amid public opposition to overseas investment, particularly by state-owned Chinese firms. The Ausgrid sale has also raised doubts about Australia's openness to foreign investment and caused confusion about its regulatory regime.

The process "was not run as well as it could have been", said Hans Hendrischke, a professor at the University of Sydney Business School who specialises in Chinese investment in Australia. "It possibly has cost the government a considerable sum of money."

AustralianSuper, the nation's biggest super fund, and IFM Investors, the largest manager of infrastructure assets, agreed to pay about 1.4 times Ausgrid's regulated asset base value, according to Brett Himbury, the chief executive officer of IFM. StateGrid offered a multiple of 1.7 times, according to people familiar with the bid. The power network's regulated asset base stood at $14.75 billion in the 2016 financial year, according to the state government.

State Grid didn't immediately respond to an emailed question for comment.

Federal Treasurer Scott Morrison blocked the State Grid offer and a separate bid from Hong Kong-based Cheung Kong Infrastructure Holdings in August. CKI, controlled by billionaire Li Ka-shing, issued a statement at the time saying it was perplexed by the ruling, while China said the decision would "severely" reduce the appetite of Chinese companies to invest in Australia and hurt bilateral trade ties.

NSW, which is selling assets to fund investment in schools, hospitals and roads, received an unsolicited offer from AustralianSuper and IFM last month, and opted not to run a second public tender process.

The deal will generate $16.2 billion in gross proceeds and net proceeds of about $6 billion, Premier Mike Baird said on Thursday.

'Competitive price'

"We think it's a very competitive price," said Ian Silk, chief executive of AustralianSuper. "We are comfortable with the price. We think it will prove to be a good long-term investment for members of our fund."

The deal is "very good value for our investors and obviously it's a good deal for the state," said Himbury.

"The process has run for 10 to 11 months, so the state would have a pretty good indication as to what they think they can get."

IFM and AustralianSuper hold a raft of major infrastructure assets in Australia and partnered in 2013 to buy Port Botany and Port Kembla from the NSW government in a $5.07 billion deal.

Australia is seeking to balance its need for foreign investment to drive economic growth against increased opposition to sales of farmland, real estate and strategic infrastructure to foreign investors. Morrison vetoed the sale of the nation's most iconic cattle company, S. Kidman & Co., earlier this year to a Chinese-led group saying it could be against the national interest.

Despite overseas capital being vital to Australia's future expansion, the government is arguably making it harder for foreigners to invest.

Last year, it tightened scrutiny of sales of farmland to Chinese, Japanese and Korean buyers and appointed former ASIO and Australian Secret Intelligence Service chief David Irvine to the seven-member Foreign Investment Review Board that vets investments.

Bloomberg