China Investment Corp (CIC, 中國投資), an US$814 billion sovereign fund, is leading a Chinese investor group in talks for a multibillion-dollar iron ore streaming deal with indebted Brazilian miner Vale SA, people familiar with the matter said.
The Chinese consortium is negotiating the potential purchase of a portion of Vale’s future iron ore output for as long as 30 years, two of the people said, asking not to be identified as the information is private.
Vale could fetch about US$9 billion in upfront cash from the sale, one person said.
No agreements had been reached and the talks might not result in a transaction, the people said.
Some Chinese companies and Japanese trading houses have also held discussions with the Rio de Janeiro-based company about possible deals, including acquiring a minority stake in Brazilian iron-ore assets owned by Vale, the people said.
Vale chief executive officer Murilo Ferreira in February raised the prospect of selling some of the company’s most prized assets after the miner reported its first year of losses since 1997.
The world’s top iron-ore producer has exited coal mines in Australia and is in talks with US fertilizer producer Mosaic Co to sell its South American potash and phosphate assets, which could fetch about US$3 billion, people familiar with the matter said this month.
Vale has said it wants to raise about US$10 billion through next year.
CIC is also part of a group alongside Brookfield Asset Management Inc and Singapore sovereign wealth fund GIC Pte that is close to buying a stake in a Brazilian natural gas pipeline network from state oil company Petrobras for nearly US$6 billion, people familiar with the matter said in June.
Separately, Chinese “clean energy” group Golden Concord Holdings Ltd (協鑫集團控股) is competing with Shanghai Electric Power Co (上海電力) for control of K-Electric Ltd, a US$2.3 billion Pakistani utility, people with knowledge of the matter said.
The two Chinese companies are among bidders asked to submit binding offers by the end of this month for Abraaj Group’s 66 percent holding in K-Electric, the people said.
French utility Engie SA and at least one investment fund are also in the final round, one of the people said.
The stake was valued at about US$1.5 billion based on the company’s stock price on Thursday in Karachi, Pakistan, according to data compiled by Bloomberg.
The Pakistani government owns another 24 percent stake in K-Electric, formerly known as Karachi Electric Supply Co.
Meanwhile, Australian Treasurer Scott Morrison on Friday officially rejected bids by two Chinese companies in the A$10 billion (US$7.67 billion) sale of the country’s biggest energy grid, Ausgrid, after they failed to overcome security concerns.
Last week, Morrison announced that neither State Grid Corp of China (國家電網) nor Hong Kong’s Cheung Kong Infrastructure Holdings Ltd (長江基建), the preferred bidders, would be allowed to seal a deal.
Despite incurring the wrath of Australia’s biggest trading partner, Morrison yesterday stuck by his decision, saying it was based on unspecified national interests.
“After due consideration of responses from bidders to my preliminary view of 11 August 2016, I have decided that the acquisition by foreign investors under the current proposed structure of the lease of 50.4 percent of Ausgrid, the New South Wales [State] electricity distribution network, would be contrary to the national interest,” Morrison said in a statement.
“This is consistent with the recommendation from the Foreign Investment Review Board,” Morrison said.
Additional reporting by Reuters
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