The Federal government's decision to scupper a bid from Chinese state-owned investors for majority control of one of Australia's biggest power concerns could leave key NSW infrastructure projects fiscally stranded.

Beijing-controlled China State Grid and Hong Kong listed Cheung Kong Infrastructure planned to enter a $10 billion deal to obtain a 50.4 per cent stake in Ausgrid under a 99 year lease.

State-owned utility giant Ausgrid owns and oversees the electrical distribution networks that supply power to an estimated 1.6 million customers across Sydney and the NSW Central Coast. Ausgrid was formed in 2011 following the division and sale of EnergyAustralia, with both shares in the company held by the NSW government since the spin off.

Federal Treasurer Scott Morrison has since blocked the sale of half of Ausgrid’s business on the grounds of the national security risk created by the control of domestic power assets by overseas state-owned companies.

For the time being the scuppering of the sale leaves a huge hole in funding for the NSW government’s ambitious infrastructure plans. The Baird Government intends to spend as much as $73 billion on a slew of infrastructure projects over the next four years, including railway lines, freeways, hospitals and schools, with $20 billion in funding contingent upon the offloading of state assets.

NSW Treasurer Gladys Berejiklian has put a sanguine spin on things, pointing to interest in Ausgrid from multiple parties, and saying that she expects money for the transaction to be “banked in the next state budget.”

The state Labor opposition points out, however, that the Federal government’s decision to block the sale to cash-flush Chinese companies could mean that NSW will receive billions less for the Ausgrid sale, with some estimates pegging the shortfall at around $4 billion.

“(Baird’s) entire plan has been on selling Ausgrid to the highest bidder,” said opposition leader Luke Foley. “Inevitably this state will receive billions of dollars less than Mr Baird was counting on.”

Given the scale and expense of the NSW’s near-term infrastructure ambitions, the shortfall in funding created by Morrison’s intervention in the Ausgrid sale has the potential to jeopardise a number of key infrastructure projects, or lead to dramatic reductions in their scope.

$1.1 billion could be saved on the controversial WestConnex project by rescinding plans for tunnels in the inner west of Sydney as well as the proposed construction of a massive motorway junction. Proposed “smart motorway” improvements could also suffer, given their current estimated cost of in excess of $1 billion.

While the CBD and South East light rail are bound for completion and the proposed Parramatta light rail is already locked in, regional rail lines could suffer due to their low priority compared to urban transit development.