Thursday, November 14, 2013

Three Gorges and Portugal's EDP to pour US$2b into Africa

Three Gorges and EDP to pour US$2b into Africa
Investments will mostly involve dam projects as partners seek to expand
beyond home markets
South China Morning Post, Thursday, 14 November, 2013
By Toh Han Shih

China Three Gorges and Energias de Portugal (EDP) plan to jointly invest
US$2 billion in Africa by 2020.

Both companies would equally share the investment, which would mostly be
in dams that Three Gorges would help build, the Portuguese utility
firm's board member Joao Marques da Cruz said at the Africa Investment
Summit in Hong Kong this week.

"We are facing a partnership between China, Europe and Africa. The
primary destination of our common investment is Africa," said da Cruz.

The Portuguese government sold 21.35 per cent of EDP to Three Gorges for
€2.69 billion (HK$28 billion) in May last year, making the Chinese firm
the largest shareholder in the formerly state-owned company.

This was the largest privatisation in Portuguese history and one of the
biggest mergers and acquisitions in Europe last year, said Joao Soares
da Silva, a managing partner of Morais Leitao, Galvao Teles, Soares da
Silva & Associados, a Portuguese law firm that represented EDP in the deal.

The Portuguese government sold the stake to Three Gorges as part of the
European Union's conditions to resolve the country's debt problem, said
Adam Cheng, counsel of Skadden, Arps, Slate, Meagher & Flom, a US law
firm that acted for the Chinese state-owned company.

As part of the deal, both firms had entered a strategic agreement to
invest in existing and future projects throughout the world, said da Silva.

Three Gorges would start to invest in Latin America and Africa, where
EDP already has a presence, while the Portuguese firm would invest for
the first time in Asia, including China.

One motivation for Three Gorges' investment in EDP was its ambition to
expand internationally, said Cheng. "Although Three Gorges is famous for
the Three Gorges Dam, it is a local company. It wants to marry a partner
with international experience," he said.

Da Cruz said a good partner with financial muscle was important to EDP.
"After the transaction, EDP got €1.8 billion of loans from Chinese
banks, which is obviously good," he said.

As part of the agreement, major Chinese banks including Industrial and
Commercial Bank of China and Bank of China would enter Portugal for the
first time, said da Silva.

Three Gorges also agreed to invest €2 billion until 2015 in EDP's
renewable energy projects, he added.

Under the deal, the Portuguese firm sold 49 per cent of its renewable
energy unit, EDP Renovaveis, plus debt to Three Gorges' Hong Kong
subsidiary, CWEI (Hongkong), for €368 million in June, said EDP's website.

Renovaveis was the third-largest renewable energy company in the world
with presence in 11 countries, said da Silva.

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