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Economy

Three Gorges' EDP takeover likely to proceed

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2018-05-15 13:11Global Times Editor: Li Yan ECNS App Download

Chinese investment in European electricity not seen as sensitive: experts

The proposed bid from State-owned China Three Gorges for a potential takeover of Portugal's electricity utility Energias de Portugal (EDP) is likely to gain regulatory approval from the EU and the U.S., as Chinese investment in EU member countries' electricity sectors is considered to be "not very sensitive" and the tie-up will boost Portugal's waning economy, experts said.

Western media outlets have been reporting that the proposed offer would be a test of the EU's readiness to allow China to take control of major infrastructure firms in its member nations and the attitude of U.S. President Donald Trump's administration toward Chinese deals amid strained bilateral relations.

Three Gorges launched a 9.07 billion euros ($10.83 billion) offer to buy 77 percent of Portuguese electricity generator and distributor EDP that it doesn't already own, the Chinese company said in a statement issued on Friday in Lisbon.

Three Gorges told the Global Times on Monday that "it does not have any updated information to disclose."

Zhang Jiayuan, a partner at Beijing-based Ransenhuizhi Investment Fund Management Co, told the Global Times on Monday that for the proposed offer to proceed, the deal needs approval at a general shareholders' meeting. It is also subject to several regulatory approvals, including from the EU and the Committee on Foreign Investment in the U.S. (CFIUS), as one of its subsidiaries - EDP Renewables - has wind and solar power assets in the US.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Monday that the chance is very "large" that the deal would be approved by the EU and CFIUS.

"The US is not very sensitive about Chinese investment in the electricity sector … Unlike industrial sectors such as steel or photovoltaics, the Trump administration has not engaged in any rhetoric on China's 'illegal subsidies' to the electricity industry," Lin explained.

Zhang also noted that Trump's stance on Chinese issues has "drastically softened" from Sunday, indicating a high chance that the deal could be completed.

Trump tweeted on Sunday night (U.S. time) that he was working with Chinese President Xi Jinping to ensure ZTE would get back into business fast.

Lin noted that although the electricity industry is a basic infrastructure sector, it is not a strategic core industry for the EU, which may further ease EU member countries' concern on screening the deal. The only worry hanging over the bid is energy security, he added.

The Portuguese government has been very supportive of Chinese investment.

Portuguese Prime Minister Antonio Costa told reporters earlier that the government "had nothing against [Three Gorges' proposed deal], no reservation," Reuters reported over the weekend. "The Chinese have been good investors," Costa added.

Since Portugal's 2010-14 financial crisis, Chinese companies have acquired various assets in the country, from infrastructure to the banking sector. Prominent examples include State Grid Corp's purchase of a 25 percent stake in Portuguese national energy network company Redes Energéticas Nacionais in 2012.

"These marriages have been a boon for Portugal's debt-ridden companies, which Portuguese authorities welcome," Zhang stressed.

Three Gorges said in the statement that it will be committed to preserving EDP's Portuguese identity and autonomy as well as its Portuguese public listing.

  

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