China invests in European transmission systems; Elia to decide on sale of 50Hertz stake

Chinese company SGCC (State Grid Corporation of China) is a serious and apparently the only interested buyer for a stake in transmission system operator 50Hertz. The sale now depends primarily on whether the company's majority owner exercises its pre-emption right to the 20% stake being sold. By selling the stake, IFM Investors will reduce its holding to half. China's interest in critical infrastructure is raising concerns in Germany.

Interest from China-origin investors in Europe also extends to the energy sector, where regulated assets in particular are a highly attractive investment for a number of multinational companies. In addition to investments in energy infrastructure, Chinese companies have a clear interest in building nuclear power plants – besides their interest in completing Dukovany, they are already participating in the construction of Hinkley Point C nuclear power plant.

However, more investments are being made in energy infrastructure, where a stake in 50Hertz could join existing acquisitions. Investment company IFM Investors decided to sell a 20% stake in 50Hertz, offering half of its current holding for sale. The remaining 60% is owned by Belgium's Elia, which is also a transmission system operator.

It now effectively decides whether the sale goes ahead, as it has a pre-emption right to the stake being sold. However, according to Reuters sources, it is unlikely that the company will exercise this right.

Elia has two months to exercise its pre-emption right.

Moreover, it can reportedly be assumed that the Chinese investor's offer will be the only one. The amount offered, which may reach up to one billion EUR, is more than generous and is therefore unlikely to face competition. At the same time, the investment will not be reviewed by the German government, as under the country's legislation only the sale of a stake of at least one quarter can be reviewed in this way.

50Hertz will not be the Chinese investor's first European acquisition

Investments in energy infrastructure have so far produced greater results than the planned construction of Chinese nuclear reactors in Europe. SGCC already owns a 35% stake in Italy's CDP Reti, which among other things manages Italian transmission system operator Terna and gas distribution system operator Italgas.

SGCC also holds a significant quarter stake in Portugal's REN, which provides both gas transmission and electricity transmission in the country. Its latest acquisitions include a 14% stake in Belgium's Eandis and a 24% stake in transmission system operator Admie.

According to earlier information, SGCC's total investments should rise to as much as $50 billion by 2020.