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State Grid powers on by buying 7 Brazil firms
By Richard Fu |
December 23, 2010, Thursday
|
Print Edition
Print Edition
STATE Grid Corp of China has acquired seven power transmission companies in Brazil in a US$989 million deal that marks its first venture into a non-Asian market.
The deal could improve China's influence in the global power utility sector. At home, China has embarked on a 10-year project to build a "smart grid" that will catapult power transmission into the digital age, securing power supplies and boosting energy conservation, and State Grid is at the center of this huge plan.
State Grid yesterday said it secured the Brazilian deal last week, which gave it a 30-year concession to operate more than 3,000 kilometers of power lines, substations and other infrastructure that service the southeast of Brazil - the country's most developed region that includes big cities such as Rio de Janeiro and Sao Paulo.
It has an option to extend the 30-year license for a further 20 years.
There are some similarities between China and Brazil: both see power demand rising fast, and span vast areas and are hampered by uneven distribution of resources - this creates a market for ultra-high voltage (UHV) lines which allow for heavy electricity flows with lower loss in transmission.
State Grid said Brazil appreciated the company's progress made in UHV projects and smart grid, and may have China's successful experiences in UHV to go by.
The Beijing-based company also expected "notably higher" returns on the Brazilian transmission lines than its business in the domestic market, where tariffs are regulated.
The Brazilian assets could generate annual profit of more than US$110 million.
The deal could also bring more Chinese mechanical and electrical equipment, engineering, grid technology and management resources to South America, it said.
State Grid first ventured overseas in 2007 when the company won the right to run a power distribution network in the Philippines.
The deal could improve China's influence in the global power utility sector. At home, China has embarked on a 10-year project to build a "smart grid" that will catapult power transmission into the digital age, securing power supplies and boosting energy conservation, and State Grid is at the center of this huge plan.
State Grid yesterday said it secured the Brazilian deal last week, which gave it a 30-year concession to operate more than 3,000 kilometers of power lines, substations and other infrastructure that service the southeast of Brazil - the country's most developed region that includes big cities such as Rio de Janeiro and Sao Paulo.
It has an option to extend the 30-year license for a further 20 years.
There are some similarities between China and Brazil: both see power demand rising fast, and span vast areas and are hampered by uneven distribution of resources - this creates a market for ultra-high voltage (UHV) lines which allow for heavy electricity flows with lower loss in transmission.
State Grid said Brazil appreciated the company's progress made in UHV projects and smart grid, and may have China's successful experiences in UHV to go by.
The Beijing-based company also expected "notably higher" returns on the Brazilian transmission lines than its business in the domestic market, where tariffs are regulated.
The Brazilian assets could generate annual profit of more than US$110 million.
The deal could also bring more Chinese mechanical and electrical equipment, engineering, grid technology and management resources to South America, it said.
State Grid first ventured overseas in 2007 when the company won the right to run a power distribution network in the Philippines.
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