A $5 billion-plus investment by Chinas state power grid into
Australian electricity and gas assets is set to test the countrys
receptiveness to Chinese government-backed takeovers and could pave
the way for larger acquisitions.
State Grid Corporation of China , the worlds biggest utility, said
on Friday it would take a 19.99 per cent stake in Singapore Powers
listed SP AusNet for $824 million, and 60 per cent of its unlisted
The Jemena portfolio, which includes a chunk of Victorias power
and NSWs gas grids, was valued at $9billion in its most recent
accounts, signalling the deal is worth more than $5billion in
total, including debt.
The transactions, revealed early Friday on afr.com and confirmed
later by the companies, are subject to approval by the Foreign
Investment Review Board and Chinas National Development and Reform
Commission. Initial talks have already taken place.
Attraction of Australian assets
FIRB approval is likely to be the most sensitive, given State
Grid would get control over part of Melbournes electricity network
and of the NSW gas distribution grid, as well as of the main gas
pipeline from the Bass Strait to Sydney,
State Grid wants to invest up to $US50billion by 2020 in
overseas assets, building them up to account forup to 10per cent of
its business, general manager Liu Zhenya said in January.
Assets in Australia are attractive because of the relatively
stable regulatory framework and their returns.
They do the capacity to put sizable money in a business which
they think is attractive, said Sajal Kishore, Fitch Ratings
utilities director in Sydney.
The regulatory framework is quite good, especially if you
compare it to whats around in Asia.
Lazard and Credit Suisse are advising Singapore Power. Macquarie
Capital and Goldman Sachs are advising State Grid, whose networks
cover about 88per cent of China and yield revenues of about
Singapore Powers stake in SP AusNet will fall from 51per cent to
31.1per cent, and in Jemena to 40per cent. The 49per cent of SP
AusNet that is publicly listed will be unaffected.
The investment is State Grids second within a few months in
Australia. It bought a 40per cent interest in South Australias
ElectraNet network late lastyear for $500million. It is also
thought to be on the shortlist to buy a stake in New Zealand
The acquisitions mark a new stage of maturity in Chinas offshore
investments beyond deals to s...