State Grid Corporation of China’s (SGCC) planned purchase of Abengoa SA’s Brazilian power transmission operations is facing ongoing delays as a result of the high level of complexity it has encountered in the asset evaluation process. That’s according to Xiao Bin (肖斌), an official at theState Grid Brazil Holding SA (国家电网巴西控股公司), the local subsidiary of SGCC, who made reference to the highly diverse nature of the assets in question and their complicated financial position.
“The acquisition is still in talks and there is no certain time for how long it will take,” Xiao said. He added that a formal proposal has yet to be made.
SGCC’s confusion is shared by industry analysts who have also had difficulty estimating the value of Abengoa’s Brazilian assets, which comprises facilities that are operational and reneue-generating as well as ones that are being developed. In the latter category, Abengoa has about 6,000km of transmission lines under construction that will require the purchaser to take on billions of dollars of future investments.
The Brazilian government has indicated that it would expect a large and well-capitalized entity like SGCC to acquire all of Abengoa’s Brazilian assets as a package.
This news service previously reported, citing a SGCC source, that this transaction was a politically sensitive one and that it should not be viewed as a simple sale and purchase agreement between two companies. The state-owned Chinese company, which has invested USD 2.58bn (CNY 16.83bn) in Brazil’s power transmission sector since 2010, believes that the expertise it has developed via the construction of China’s vast ultra-high-voltage projects over the past two years gave it a competitive advantage over rival bidders.
Financially-distressed Abengoa, which filed for bankruptcy protection in November 2015, is Brazil’s largest non-state owned power transmission operator. Its Brazilian operations have total net debts of USD 825m (CNY 5.4bn), of which more than USD 218m (CNY ) are owed to local equipment suppliers in the country, according to the electricity industry association Abinee.
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