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2011-12-23 - 01:05:00 - WSJ(12/23) China Gets Stake In Portugal's EDP
 

WSJ(12/23) China Gets Stake In Portugal's EDP

   (From THE WALL STREET JOURNAL)
   By Patricia Kowsmann and Wayne Ma

Portugal's government said on Thursday that China Three Gorges Corp. won the bidding for its 21% stake in EDP-Energias de Portugal SA with an offer of 2.69 billion euros ($3.51 billion), in the first of a series of sales of state-owned assets under its austerity program.

The deal marks the first time a mainland Chinese firm acquired a significant stake in a southern European company and may portend other such moves as cash-strapped European governments from Madrid to Athens have been clamoring for Chinese funding to help them finance gaping budget deficits.

For government-controlled China Three Gorges, which operates the $23 billion Three Gorges dam on the Yangtze River, the transaction opens doors to EDP's renewable-energy assets in Brazil, a key emerging power. The Portuguese company is a major power producer there, operating a sizable fleet of hydroelectric plants and supplying more than two million customers with energy.

The investment will help China Three Gorges "showcase its superiority in hydropower, clean energy project construction and power production," Chairman Cao Guangjing said in a statement.

It also shows how Portugal's centuries-old links with Brazil and Africa are now making the cash-strapped country an attractive investment for Chinese companies, underscoring a shift in world power that has seen emerging economies asserting their might over newly fragile developed countries.

Portugal is selling its crown jewel assets as part of a 78 billion euros bailout agreement it entered into with the European Union and the International Monetary Fund. Under the terms of the rescue, Portugal has committed to cut government spending and its budget deficit.

"The privatization program is not only important because it gives us access to a source of financing," Portuguese Finance Minister Vitor Gaspar said on Thursday. "It also shows that one can diversify such financing sources."

Portugal's treasury secretary, Maria Luis Albuquerque, said Chinese banks behind China Three Gorges are willing to provide financing to other Portuguese companies.

The Chinese firm, which outbid German heavyweight E.ON AG and Brazil's Centrais Eletricas Brasileiras SA, has big ambitions but a small international profile for now. Portugal's government expects China Three Gorges to invest over 8 billion euros in EDP to support its expansion plan. The Chinese company also wants to tap EDP's experienced management team.

As weak euro-zone economies shed prized assets through ambitious privatization programs to cut debt, Portugal is attracting significant investments from China because of its presence in former colonies that are resurfacing as red-hot markets, rich in natural resources.

Portugal's Galp Energia SGPS SA, for example, recently closed a $5.19 billion deal to sell a 30% stake in its Brazilian unit to China Petrochemical Corp. Galp needs cash for future investments linked to its 10% share in Brazil's largest oil project.

"Portugal has big attractiveness because it knows Africa and South America well," said Ricardo Salgado, chief executive of Banco Espirito Santo SA.

Banco Espirito Santo controls a bank in oil-rich Angola, BES Angola. BES and its Chinese counterpart agreed to cooperate in Portuguese-speaking markets, where the Asian giant and its companies are doing an increasing amount of business.

China bought $57.7 billion in goods from eight Portuguese-speaking markets, led by Brazil and Angola, from January to September, up 23% from a year ago, according to Chinese government data. Chinese exports to those countries rose 34% in that period to $28.8 billion.

---

Stefani Qi and Liyan Qi in Beijing and David Roman in Madrid contributed to this article.


(END) Dow Jones Newswires

December 22, 2011 20:05 ET (01:05 GMT)

Copyright (c) 2011 Dow Jones & Company, Inc.

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