China Southern Power Grid has agreed to pay around $2.9 billion to acquire two Peruvian assets from Italy’s biggest utility, Enel, as the Chinese state-owned major deepens its footprint in South America amid a global business expansion.
Under the agreement, a subsidiary of the Rome-based company will sell its entire 83.15% stake in distribution and supply company Enel Distribucion Peru and 100% stake in advanced energy services provider Enel X Peru to China Southern Power Grid International (HK), the overseas investment unit of the Chinese firm, according to Enel’s announcement released Friday.
The deal will further strengthen the Guangzhou-based operator’s presence in South America. In March 2018, the firm announced a $1.3 billion deal to acquire 27.8% in Chile’s largest electric transmission system, Transelec, from an infrastructure subsidiary of Canadian firm Brookfield Asset Management.
South American countries including Chile and Peru are strong growth markets for power grid infrastructure, said Li Qingkui, the company’s chairman at the time.
“Such infrastructure investments may not generate high returns in the short term, but income will be stable and sustainable,” Li was quoted as saying in an Economic Information Daily article in 2018 that was shared by the company.
In addition to South America, China Southern Power Grid has also announced energy deals in other regions, including participation in a joint investment with China General Nuclear Power Corp. in 2018 to acquire a stake in Malaysian energy company Edra Power Holdings. In the same year, the company agreed to buy a 25% stake in European utility Encevo from private equity firm Ardian France.
The deal, part of Enel’s massive asset sale plan to cut down its debt, will still need clearance from authorities in Peru and China, according to Friday’s statement.
Chinese energy companies have set their sights on Latin American assets in the past few years. In November 2020, State Grid Corporation of China agreed to pay 2.57 billion euros ($3 billion) for a 96% stake in an electricity network company in Chile.