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Chinese influence grows in Brazilian power sector

Chinese power conglomerates are being welcomed in Brazil at a time when proposed Beijing-driven power takeovers are experiencing opposition in North America, Europe and Australia.

Just last week the Australian government intervened to halt the sale of some of its grid infrastructure to Chinese interests, however the influence of the Asian giant is seeing no such resistance in Brazil, where the country’s recession, high debt and looser takeover barriers are encouraging foreign acquisition.
Brazilian eye
Since the start of 2015, Chinese companies have been involved in three of the six largest announced electricity mergers in Brazil, according to Thomson Reuters deals intelligence data. The number is poised to grow significantly in the coming months as debt-laden targets speed up their sale for prices and conditions deemed as attractive by the Chinese.

Last month, State Grid bought construction conglomerate Camargo Correa SA’s 23.6 percent stake in CPFL Energia SA for $1.8bn. Meanwhile China Three Gorges Corp is actively scouting for potential power assets.

“There are multiple opportunities and potential purchases that we are analysing … we want to become a relevant player,” Li Yinsheng, the chief executive officer of the local unit of Three Gorges, the world’s largest hydroelectric power producer, told Reuters in an interview.

Brazilian Mines and Energy Minister Fernando Coelho has repeatedly said he has “no prejudices” against Chinese takeovers.

Brazil has become State Grid’s No. 2 M&A destination since 2010, accounting for 23 per cent of the $20.1bn it spent on acquisitions during that period, while Brazil acquisitions represented 15 per cent of Three Gorges’s $27.8bn worth of M&A deals in this timeframe.

Chinese involvement in Brazil also helps Chinese suppliers to the industry that are struggling with a domestic slowdown, executives and analysts said.