China Southern Power Is Said in Talks to Buy Chile’s Transelec

Electricity towers and power lines against a pink sky. Photo by Bloomberg Creative Photos /Bloomberg Creative

Article content

(Bloomberg) — China Southern Power Grid Co. is in advanced talks to acquire a controlling stake in Chilean power transmission company Transelec SA, people familiar with matter said, in what could be one of the biggest Chinese outbound deals this year.

Article content

China’s second-largest electricity network operator, which already holds nearly 28% of Transelec, is considering teaming up with Latin America-focused alternative asset manager Patria Investments Ltd. and a Chinese sovereign wealth fund to bid for the stakes held by three Canadian pension funds, the people said, asking not to be identified because the discussions are private.

Article content

Article content

Article content

A potential deal, which has been discussed for about two years, could be valued at more than $4 billion, the people said. The companies may reach an agreement as soon as the coming weeks, they said, adding that talks are ongoing and no final decisions have been made.

Article content

Article content

The parties would still need to obtain approval from Chilean regulators for a deal, which could be challenging given that China already controls much of the South American country’s power distribution market, the people said.

Article content

While Chile’s economic prosecutor’s office has approved multibillion dollar acquisitions from Chinese companies, there has been growing scrutiny and public debate over foreign control of critical infrastructure and the balance between investment openness and national interest.

Article content

Transelec is Chile’s biggest power transmission company, operating high-voltage lines and linking generation hubs with distributors to help integrate growing renewable capacity into the grid. It has more than 10,000 kilometers (6,200 miles) of power lines across the country.

Article content

The pension funds holding the remaining roughly 72% of Transelec are Canada Pension Plan Investment Board, British Columbia Investment Management Corp. and Public Sector Pension Investment Board. 

Article content

Article content

Bloomberg News reported in December 2023 that China Southern Power was considering bidding for their stakes. CPPIB is Transelec’s second-largest shareholder with a 27.73% stake, while BCI and PSP hold 26% and 18.48% respectively, according to Transelec’s latest annual report.

Article content

Representatives for Transelec and the Canadian pension funds declined to comment, while Guangzhou-based China Southern Power and Patria didn’t respond to requests seeking comment.

Article content

China Southern Power bought its current stake in Transelec from Brookfield for about $1.3 billion in 2018. The Chinese company has been expanding its reach in Latin America, including a roughly $3 billion acquisition of Enel SpA’s Peruvian assets.

Article content

In addition to China Southern Power, State Grid Corp. of China has a significant presence in Chile, having acquired businesses such as Chilquinta Energia SA and Compania General de Electricidad SA, known as CGE, around the start of this decade.

Article content

—With assistance from Paula Sambo, Carolina Gonzalez, Kathy Chen, Cristiane Lucchesi and Elffie Chew.

Article content