China Three Gorges, state-owned operator of the world's largest hydropower project, said it aimed to develop top Portuguese utility EDP into a leading global clean energy group after it signed a deal on Friday to buy a 21 percent stake.
"Both companies are highly complementary in terms of competitive strength and development strategies, which provides a common platform," Three Gorges Chairman Cao Guangjing said during the signing ceremony.
"We want to develop EDP into a sustainable, fast-growing and leading international clean energy group," he said. EDP unit EDPR is already the world's fourth-largest wind energy producer.
Cao said the 2.7 billion euro ($3.5 billion) deal [ID:nL6E7NM2I9], which also involves Chinese investment in Portugal's embattled economy, will serve as a bridge to create close cooperation between Chinese and Portuguese companies, especially in such fields as trade, finance and tourism.
The government agreed to sell the stake - the largest single holding in EDP - under a sell-off of a number of state assets demanded in the terms of a 78 billion euro EU/IMF bailout for Portugal.
"It is the government's firm belief that the success of the operation will contribute much to the reputation of Portugal as a place to invest," Finance Minister Vitor Gaspar said, adding that the deal "reflects ongoing deepening of strategic and long-term relations between Portugal and China."
PROMOTING PORTUGAL
As part of the agreement, Three Gorges said it would promote lines of financing for Portuguese banks and other companies, potentially including capital for Millennium bcp, the country's largest listed bank by assets.
Expectations of such investment have recently boosted Portuguese banking stocks from record lows. BCP was up 4.6 percent at 1627 GMT.
EDP shares were up 1 percent, leaving them with a drop of about 4 percent this year, outperforming a nearly 30 percent fall in the broader PSI20 Lisbon bourse index.
CTG Vice President Lin Chuxue told a news conference the company saw wind power unit EDPR as "a very good platform for future expansion in European countries but also maybe Asia."
Cao said EDP and CTG "can cooperate with each other in eastern Europe and also in South America," but would not elaborate. EDP has a big subsidiary in Brazil.
The deal locks the stake bought by CTG for four years. CTG officials would not comment on the possibility of buying a controlling stake in EDP in the future. "Then (after the lock-in period), it will depend on the situation," Lin said.
Asked whether CTG had plans to buy other companies in Europe or globally, Cao said only that "if the opportunities are good and price cheap enough, CTG would be interested in other international assets," but added that it had no concrete plans at the moment.
The EDP deal highlighted China's appetite for physical assets in troubled economies in Europe and its ability to make its bids attractive with the promise of financial support, but analysts do not expect a wave of Chinese acquisition to swamp the European Union.
China Three Gorges, which operates among other projects the dam of the same name, has a dozen subsidiaries including listed unit China Yangtze Power Co Ltd.
