China’s State Grid Corp (國家電網), the world’s largest utility, is in talks to buy a stake in Brazilian power distributor CPFL Energia SA, according to people with knowledge of the matter.
Government-owned State Grid is in discussions to purchase some or all of Camargo Correa SA’s holding in CPFL, one of the people said, asking not to be identified as the information is private. Camargo Correa owns about 23.6 percent of the company, according to CPFL’s Web site. Based on CPFL’s market value of about 20.8 billion reais (US$6.16 billion), the entire stake could be valued at about US$1.5 billion, not including any premium paid by the acquirer.
The Chinese power distributor has been making acquisitions globally and is not limited in how much it can spend to expand, State Grid’s then-chairman, Liu Zhenya (劉振亞), said in a March interview.
Discussions are still ongoing and might not result in a transaction, the people said.
Camargo Correa has not made any decision on its stake in CPFL, according to a statement issued on Wednesday. The Brazilian builder is always evaluating strategic opportunities and is regularly in contact with potential investors, it said in the statement.
Any deal would add to the US$144.3 billion in overseas acquisitions by Chinese companies this year, data compiled by Bloomberg showed. State Grid was among suitors planning to submit bids for Australian power network Ausgrid, which could fetch more than A$10 billion (US$7.57 billion), people with knowledge of the matter said in February.
State Grid, which distributes electricity to 1.1 billion people, had a profit of 86.5 billion yuan (US$13.15 billion) on a revenue of 2.08 trillion yuan last year. The company was named the preferred bidder for a 14 percent stake in Belgian electricity and gas distribution system operator Eandis Assets earlier this month, according to a news release.
State Grid already operates in Brazil, running about 6,000km of transmission lines. In April, the company won the largest portion of an auction of transmission lines in the country, gaining a total of 1,005km.
The company is interested in Brazil’s power generation and distribution assets, said Ramon Haddad, vice president for operations at State Grid’s local unit, in July last year. At the time, State Grid had just won its second contract to build power lines that will link the world’s third-biggest hydroelectric dam, Belo Monte, to Brazil’s largest consumer market.
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