State Grid Corporation of China is to acquire 25 per cent of Portugal’s national power grid in the second large-scale Portuguese acquisition by a Chinese energy group in six weeks.
Lisbon said on Thursday that Oman Oil, the only other bidder, would acquire 15 per cent of the grid operator, Redes Energéticas Nacionais, in a deal that values the 40 per cent being sold by the Portuguese state at €592m.
Under the terms of its €78bn financial rescue package, Portugal agreed to sell 40 per cent of REN to international bidders.
State Grid’s purchase of 25 per cent, in a package involving a total commitment of more than €1.4bn in investment and credit, reflects a growing appetite for Chinese funds among cash-strapped European governments.
In December, China’s Three Gorges Corporation defeated rival bids from Eon, Germany’s largest utility, and other groups to acquire 21 per cent of Energias de Portugal, the country’s dominant power company, offering a package worth as much as €8bn in investment and finance contracts.
China’s utility companies have been keen to expand overseas by seizing the opportunities presented by the global economic downturn, and none has more financial firepower than State Grid, the country’s biggest utility.
The Chinese group offered €2.90 a share for 25 per cent of REN, valuing the stake at €387m, a 40 per cent premium on the closing price of February 1.
State-owned Oman Oil offered €2.56 a share for 15 per cent of the Portuguese group, a premium of 23 per cent.
The Lisbon government said the higher premium paid by State Grid reflected its future role as REN’s “principle industrial and strategic partner” and the bigger stake it was acquiring.
Lisbon described Oman Oil, seen by analysts as acting in a similar role to a sovereign wealth fund for the Arab state, as “a long-term financial partner” for REN.
As part of the deal, State Grid will guarantee finance of €1bn, to be provided through the China Development Bank, to help refinance REN’s debt at competitive rates. The Portuguese group’s short-term refinancing requirements to 2015 amount to about €1.6bn.
Oman Oil will also contribute to the refinancing, helping to relieve the company of a considerable financial burden. The privatisation leaves the Portuguese state holding 11 per cent of REN, which it is committed to selling in a public offering.
State Grid’s offer includes large-scale commitments to support the expansion of REN in Portugal and overseas. REN is to become a strategic service provider to State Grid in Brazil, with an initial project due be launched this year.
Joint ventures are also to be set up in the former Portuguese colonies of Angola and Mozambique.
International expansion is a key goal for the Chinese utility, which already owns transmission assets in the Philippines and Brazil.
State Grid is also understood to be looking at other utilities in Europe, including a possible stake in Ireland’s transmission network.
Lisbon has stipulated that no single bidder will be permitted to own more than 25 per cent of REN. The holdings acquired by State Grid and Oman Oil will also be locked in for four years.
Voting rights in REN are limited to 5 per cent per shareholder, but are to be altered, giving the two new shareholders rights in line with their holdings.
Deutsche Bank and Portugal’s Banco Espírito Santo advised State Grid.
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