Caixin
Jun 28, 2020 01:29 AM
BUSINESS & TECH

State Grid Boosts South America Presence with $2.23 Billion Purchase in Chile

China’s largest electric grid operator has acquired Chilean peer Chilquinta Energia SA for around $2.23 billion in cash, beating out an international group of bidders as its builds up its global footprint.

State Grid Corp. of China’s overseas unit State Grid International Development Ltd. made the purchase from American firm Sempra Energy, according to an announcement on Thursday, in a contest whose other bidders included Italy’s Enel Group and Canada’s Brookfield Asset Management Inc. Hometown rival China Southern Power Grid Co. also competed in the bidding.

That purchase price is around 17 times Chilquinta’s earnings before interest, taxes depreciation and amortization (EBITDA), local media reported.

The deal also gives State Grid a 100% interest in Tecnored S.A., which provides electric construction and infrastructure services to Chilquinta and third parties, and a 50% interest in power transmission company Eletrans S.A., according to a press release from Sempra Energy. 

Ratings agency S&P said late last year that the acquisition is in line with State Grid’s investment strategy of focusing on public utilities in regulated markets, and estimated the company will provide financial support for its new subsidiary in the deal.

Chilquinta’s revenue mostly comes from the power distribution business, with lines of 16,900 kilometers spread across the country. It provides electricity to approximately 2 million people.

The deal makes Chile the second South American country where State Grid has invested. It established a local branch in Brazil in 2010, which now provides electricity to 15 states and includes the mega cities of Sao Paulo and Rio de Janeiro. State Grid has invested $12.5 billion in Brazil to date, accounting for 60% of its overseas investments.

The Chinese power giant has also invested in Europe. It first invested there in 2012 by acquiring a 25% stake in major Portuguese energy company Redes Energéticas Nacionais for 387 million euros ($434 million). In the following years it acquired 35% of Italian holding company CDPReti and 24% of Greece’s ADMIE S.A. for 2.1 billion euros and 320 million euros, respectively.

As of June this year, State Grid had overseas assets worth around $65 billion, including other properties in Australia and the Philippines.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Yang Ge (geyang@caixin.com)


loadingImg
Register to read this article for free.
Register
Share this article
Open WeChat and scan the QR code