Caixin
Jul 21, 2021 08:58 PM
BUSINESS & TECH

State Grid Aims to Give Jolt to Bloated Brazilian Peer With $510 Million Stake Deal

A State Grid office in Shenyang, Northeast China's Liaoning province, on June 12. Photo: VCG
A State Grid office in Shenyang, Northeast China's Liaoning province, on June 12. Photo: VCG

Leading electricity distributor State Grid of Corp. of China has won a bidding contest to buy 66% of mid-sized Brazilian peer CEEE for 2.67 billion reals ($510 million), marking its latest acquisition of such assets in developing markets.

The investment gives State Grid majority control of one of Brazil’s top 10 power distributors, with a distribution network covering the equivalent of 6,000 kilometers and 72 transformer substations. CEEE earned a profit of 193 million reals in its 2020 fiscal year, and its assets account for about 4% of the total in Brazil’s overall electric grid.

Before the stake sale, CEEE’s controlling shareholder was the local government of the Brazilian state of Rio Grande do Sul, the country’s southernmost state bordering Argentina and Uruguay. The government sold the stake in a bid to improve the performance at CEEE, which generally lags its private sector peers.

The deal still requires approval from Brazil’s power and antitrust regulators.

The investment marks the latest on the global stage for State Grid, which has been buying assets abroad since 2004. Its Brazilian presence dates back about a decade, beginning with its establishment of a unit to invest in and operate assets locally in 2010. In 2017 it teamed up with several partners to acquire 54.64% of CPFL, Brazil’s second largest private electricity generator and grid operator. Since then the group has increased its holdings to 83.71% of the company.

CPFL played a key role in State Grid’s latest bid for CEEE, said CPFL President Gustavo Estrella. “Our extensive experience and strong finances made our bid extra competitive,” he said.

State Grid said its latest Brazilian acquisition will help it achieve its strategic goals by allowing it to use its assets and experience with CPFL to achieve new synergies with CEEE.

Besides Brazil, State Grid’s other South American investments include its $2.23 billion purchase of the power distribution assets of Chilquinta Energía, one of Chile’s top power distributors. Also last year it paid 2.57 billion euros ($2.9 billion) for 96.04% of top Chilean power distributor Compañía General de Electricidad.

Outside South America, State Grid also owns international assets in the Philippines, Portugal, Australia, Italy, Greece and Oman, with total overseas assets worth $23.2 billion.

Contact reporter Yang Ge (geyang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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