China Three Gorges Corp (CTG, 中國三峽集團) halted talks with EU regulators about its proposed 9 billion euro (US$10.26 billion) takeover of Portugal’s EDP-Energia de Portugal SA more than a month ago, two sources close to the matter said, casting doubt on whether the deal will progress.
CTG in May last year launched a bid to take control of EDP, of which it already owns 23 percent, but the transaction has moved at a slow pace.
Sources said that CTG has yet to complete regulatory filings in Europe and the US, although Portugal’s regulator said there were no signs that the Chinese state-owned utility is preparing to abandon the deal.
Three sources close to the matter said that CTG’s interest in lifting its stake in Portugal’s biggest company has waned due to a combination of factors, including a leadership shake-up at CTG, the prospect of tougher EU regulations on foreign investment and higher EU electricity tariffs.
“CTG continues to progress with all regulatory filings, continuing to work with a full suite of advisors in discussions with the regulators in different jurisdictions and in the fulfillment of all the prior conditions for the launching of the voluntary tender offer for EDP,” a CTG spokesman said in a statement.
"The current timings and calendar for such approvals is in line with other comparable transactions of this magnitude and complexity," the statement said.
EDP and the European Commission declined to comment.
An EU proposal in November last year on rules for a far-reaching system to coordinate scrutiny of foreign investments into Europe, notably from China, is to be voted on by the European Parliament in next month or in March.
Under the plan, the European Commission would investigate foreign investments in critical sectors and offer opinions.
"That the anti-Chinese sentiment is also growing in Europe is a fact, and I can see how this is discouraging CTG," a banking source said.
The deal also faces hurdles in the US, given that EDP's renewables arm, EDP Renovaveis SA (EDPR), has about US$7 billion of assets in the country, making it subject to regulatory approval there.
The Committee on Foreign Investment in the US (CFIUS), which examines deals for national security risks, has stepped up its scrutiny since US President Donald Trump became president in 2017, with Chinese investment in particular facing closer examination.
CTG has tried to sound out bidders for EDPR, including Italy's Enel SpA and Spain's Iberdrola SA, to reduce the risk of US objections, but talks stopped as the process kept dragging on, sources said.
European utilities have been undergoing a wave of consolidation, seeking to create scale, partly because of an increasing shift to renewable energy sources, which is forcing them to change business models.
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