State Grid in talks to buy wind power assets from American utility
The State Grid Corporation of China, a monopoly power distributor in all but five southern provinces of the mainland, is in talks to buy wind power assets from the United States power utility AES.
The transaction would be the state-owned firm's first foray into the US power market. Its international expansion has included the Philippines, Portugal and Brazil.
Beijing-based State Grid has held talks about taking a controlling stake in AES' wind power business, which involves generating capacity of 1.1 gigwatts (GW) and would give State Grid a stake of about 80 per cent in AES' US wind power business, Reuters cited unnamed people with direct knowledge as saying. Reuters said analysts had estimated the assets to be worth US$1.65 billion.
A person familiar with the situation told the South China Morning Post talks were continuing on the potential acquisition, but a spokesman for State Grid declined to comment.
AES, in which sovereign wealth manager China Investment bought a 15 per cent stake for US$1.58 billion in late 2009, operates more than 1.7GW of wind capacity in the US, China and Europe.
AES posted net profit attributable to shareholders of US$58 million last year, compared with profits of US$9 million in 2010 and US$658 million in 2009. Last year it had a fourth-quarter net loss of US$209 million.
Chief executive Andres Gluski said on Monday that AES planned to pay down at least US$500 million of debt and sell about US$2 billion of assets in various markets, including China, where it is not seen as a significant player.
Reuters also reported that AES recently kicked off a process to sell all or part of its businesses in China, which could raise up US$400 million.
AES said in its annual filing to the US Securities and Exchange Commission that it was highly indebted. Its net debt surged to 3.5 times shareholder equity at the end of last year, from 2.5 times a year earlier.
Two months ago, AES put its approximately 1GW coal-fired power generation business in New York State into bankruptcy protection after failing to sell it.
State Grid, which made a profit of 53.3 billion yuan (HK$65.5 billion) last year with assets of over 2.1 trillion yuan, early this month concluded a deal to buy a 25 per cent stake in the Portuguese power grid operator Redes Energeticas Nacionais.
In 2010, it bought seven Brazilian power grid operators for US$1 billion, and in 2009 it paid US$3.95 billion for 25 years of power grid operating rights in the Philippines.
Shi Yan, utilities analyst at broking house UOB Kay Hian, said State Grid's overseas forays were probably driven more by a desire to learn from foreign grid management expertise and by Beijing's desire to diversify its huge foreign exchange holding, rather than profit alone.
National territory covered by State Grid - all but five southern provinces of the mainland.