China Southern Power Grid to Purchase South American Power Assets for $2.9 Billion

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BEIJING, April 11 (TMTPOST) —— China Southern Power Grid reached an agreement with Enel SpA to purchase two assets in Peru for $2.9 billion from the latter, as Italy’s largest utility is seeking to cut its debt, according to the statement released by Enel Friday.

Under the deal, China Southern Grid will acquire 83.15 percent of Enel Distribucion Peru, the distribution company owned by Enel Peru, and 100 percent of Enel X Peru, an energy services provider. The enterprise value of the assets is expected to be about $4 billion.

Enel has about 1.5 million end users in Peru. The deal with China Southern Grid is expected to reduce its consolidated debt by about 3.1 billion euros and increase net profit by about 500 million euros in 2023, according to the company.

China Southern Power Grid International (Hong Kong) Co., LTD., a wholly-owned subsidiary of China Southern Power Grid, is the overseas investment and operation platform of China Southern Power Grid. According to the data of the State-owned Assets Supervision and Administration Commission (SASAC), the company owned overseas power supply, grid, and other power infrastructure assets in Southeast Asia, Europe, Latin America, and other regions as of February 2022, with a total value of about 40 billion yuan ($5.8 billion). As a central government-owned power enterprise in China, China Southern Power Grid has operations in Guangdong, Guangxi, Yunnan, Guizhou, and Hainan provinces, supplying electricity to 254 million people and assets totaling more than 1 trillion yuan ($145 billion).

 The acquisition of electricity distribution and other assets in Peru by China Southern Power Grid marks a further expansion of its businesses in South America. The power giant acquired a 27.8% stake in Transelec in March 2018, the largest power transmission company in Chile, for $1.3 billion from Brookfield, a Canadian asset management company.

 South America is relatively weak in power infrastructure. Li Qingkui, former chairman of China Southern Power Grid, once pointed out that Chile, Peru, and other countries in South America are growth markets. The investment and layout of power grid infrastructure have the characteristics of a natural monopoly. The short-term return may not be high, but the income is stable and sustainable. In the process of economic development of the countries, priority should be put on infrastructure connectivity. Overseas power grid investments will also drive China’s export of technology, equipment, and capital, and form industrial alliances with numerous Chinese enterprises to help them go global.

 China’s Southern Power Grid has also participated in project acquisitions in Southeast Asia and Europe in recent years. China Southern Power Grid and China General Nuclear Power Corporation jointly acquired the Edra project in Malaysia in April 2018, one of Southeast Asia’s largest independent power producers, in which China Southern Power Grid holds a 37% stake.  Southern Grid, together with French equity fund Ardian, closed a deal in Luxembourg in October 2018, to buy 24.92 percent of Encevoa, a European power utility.

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