Chinese firm takes stake in key Portuguese utility

CHINA THREE Gorges has won the competition to buy Portugal’s stake in utility EDP, paying €2.7 billion in a privatisation seen as key to the indebted euro zone country’s ability to sell state assets.

The deal, which also includes Chinese investment in the wider economy, is the brightest news for Portugal since it was forced to seek a €78 billion bailout from the European Union and International Monetary Fund in the spring after its financing costs soared.

State holding company Parpublica said China Three Gorges’ offer yesterday for the 21 per cent stake in EDP, Portugal’s largest company, was at a 53 per cent premium to its share price.

The Chinese energy giant beat Germany’s E.ON and Brazil’s Eletrobras after a tough competition in which Three Gorges had promised to sharply raise financing in EDP, enabling it to reduce debts and boost expansion plans in renewable energy projects.

Treasury secretary Maria Luis Albuquerque said the total investment in EDP and Portugal’s economy could reach €8 billion when financing by Chinese banks was included.

“This commitment is a vote of confidence in Portugal’s economy and in one of its biggest companies,” Ms Albuquerque told journalists after the cabinet met to choose the winning bid.

Ms Albuquerque said the offer included financing for Portugal’s economy, which China Three Gorges would promote, such as “lines of financing for banks and other companies”.

Andrew Horstead, head of research at UK-based energy consultancy Utilyx, said the sale was “great news for Portugal as this was a precondition” of its bailout.

“It seems that this is a changing of the old guard,” Mr Horstead said. “Although still a European stalwart, E.ON is now seeing competition from the Chinese in its own back yard,” he added, referring to the losing German bidder.

As the largest member of the euro zone, Germany is the biggest contributor to Portugal’s EU-IMF bailout.

E.ON chief executive Johannes Teyssen said: “We were not in a position to offer more than what we can justify as an appropriate and value-creating investment.”

The government is also selling a stake in state-controlled power grid company REN. – (Reuters)