BG had earlier signalled that Contact was not a core asset and it was likely to seek buyers for the 51% stake it would inherit if it bought Origin.
If the BG $A13.8 billion ($NZ17.5 billion) bid for Origin was successful, the New Zealand Takeovers Panel would require the group, or a subsidiary, to make a follow-on offer for all of the Contact shares.
That offer was subject to BG obtaining all the necessary regulatory and government approvals.
Mr Timms said the deal could go through before the New Zealand election later this year and cause problems for the Government if it had to face the issue of whether Contact was a strategic asset, as was the case with Auckland International Airport.
The Government blocked Canada Pension Plan from taking a 30% stake in Auckland International Airport because it was regarded as a strategic asset.
"Our view is that a bid for Contact will be subject to the strategic asset test by virtue of Contact's ownership of the southern hydro lakes and geothermal generation facilities," Mr Timms said.
The two hydro assets - Clyde and Roxburgh - make up half of Contact's 1885MW installed capacity and are seen as critical components of the nation's generation system.
It was also possible that the geothermal assets would attract additional attention because of their central North Island location, within traditional Maori homeland, he said.
The Contact sale might also be driven by politics because:High wholesale electricity prices existed.
Security of supply and rolling brown-out concerns existed.
Major electricity users had to cut production and the subsequent flow-on economic effects were being felt.
Contact stood to benefit from the proposed carbon tax on stationary fuels.
Mr Timms said although there was a low probability the Government would decline an Overseas Investment Office application for Contact as it was already 51% owned offshore, the risk was high enough to create significant uncertainty for an offshore party.
Asian investors would be interested in the 51% share of Contact if BG bought Origin and put it up for sale, he said.
Auckland lines company Vector's shareholders overwhelmingly backed the company's $785 million sale of its Wellington electricity network to Hong Kong's Cheung Kong Infrastructure.
Cheung Kong was a likely buyer of Contact, Mr Timms said.
However, BG might be forced to put the Contact assets out to institutional investors to prevent it going in one lump to a single party to meet Government guidelines.
Asian infrastructure investors and institutions would take a long-term view of Contact's cash flow generating capacity rather than the one or two-year focus of retail investors, he said.
