State Grid Corp. targets Brazil

28 June 2016, Week 25 Issue 363

State Grid Corporation of China is reportedly in talks to buy some or all of Brazilian builder Camargo Correa’s 23.6% stake in Brazilian power distributor CPFL Energia, it emerged last week.

Based on CPFL’s market value of around 20.8 billion reais (US$6.2 billion), the entire stake could be valued at about US$1.5 billion, not including any premium that State Grid might pay. State Grid has already established a solid presence in Brazil and a stake in CPFL would complement its existing assets in the country.

The state-run monopoly operates around 6,000 km of transmission lines in Brazil and is set to expand this by another 1,005 km after it won in April the biggest portion of an auction of transmission lines there.

Last summer, the company won its second contract to build power lines connecting the huge Belo Monte hydropower plant (HPP) to Brazil’s third biggest consumer market.

Ramon Haddad, vice president for operations at State Grid’s local unit in Brazil, said at the time that the Chinese giant was interested in acquiring Brazilian power generation and distribution assets.

For its part, Camargo Correa is under pressure to raise cash after a corruption scandal left it with huge fines to pay.

It says, however, that it has not decided yet whether to sell any of its CPFL stake but that it is constantly evaluating opportunities and is regularly in contact with potential investors.

News of the proposed CPFL deal comes as State Grid Corp’s aggressive overseas expansion drive gains momentum.

Earlier this month, it was named as preferred bidder for a 14% stake in Belgian power and gas distribution system operator Eandis Assets.

Alongside fellow suitors China’s Cheung Kong Infrastructure (CKI) and Power Assets, it is also reportedly among suitors intending to submit bids for a 50.4% stake in Australian power distributor Ausgrid that has been put on the block by the New South Wales state government. The stake is believed to be worth A$10 billion (US$12.2 billion).

State Grid’s then chairman, Liu Zhenya, said in March that there were no limits to the amount the company was prepared to invest in its expansion.

Edited by

Richard Lockhart


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