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China Three Gorges makes €9B Bid for 77% stake in Portugal Utility EDP

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Published on : May 14, 2018

There have a spate of deals in the power sector in Europe, both within and outside the region. The deal making is inspired mainly by the increasing inclination by utilities to shift to renewables for a low-carbon economy. A number of cross-border deals are supported by the constant pouring of funds from companies from China, with a key focus on pulling out a few economies in South Europe from debt.  Meanwhile, such deals enable the companies to expand their overreach in energy infrastructure in the region and across the globe.

China Three Gorges, the state-owned utility has on May 11, 2018 struck a deal with Portugal’s leading generator and distributor of electric power EDP to take its full control. The deal is all-cash offer valued at 9.07 billion euros (US$10.83 billion) and excludes the stake-around 23%-it already owns in EDP.

All-cash Offer to exclude 23.3% stake CTG holds in Portuguese Power Firm

According to preliminary announcement, CTG seeks to attain a minimum acceptance of 50 per cent and a share in EDP’s voting rights. After the takeover, CTG will be required to launch a mandatory offer for acquiring 17% of the share the listed renewables subsidiary and independent unit, EDP Renováveis, holds in the parent company. The whole group is valued at around €25.6bn that includes net debt EDP has.

Speculations have been rife that EDP is the target of acquisition from several foreign companies in Europe, especially over the past 12 months. The recent deal is considered to be the largest takeover deal for European company made by a Chinese company so far.

Proposed Deal need to get Go-ahead by the U.S. Committee and garner the EU Backing

Portugal, since its debilitating debt crisis in 2010-13, has witnessed buying of assets from numerous Chinese companies, notably in the area of insurance, banking, and infrastructure. People following the deal closely opine that it has substantial backing of the Portuguese Government, who is optimistic of the effect the Chinese investment will have on European economy. However, it has to strike a chord with European Union. More important, for the proposed deal to go through it would need the go-ahead by the Committee on Foreign Investment in the United States. This is said to test the troubled waters of the U.S. government, considered the trade apprehension it nurses with China.