China State Grid buys Brazil power assets for $1B

[December 22, 2010]  SHANGHAI (AP) -- China's biggest electricity company, State Grid, says it is paying $989 million for seven Brazilian power companies and their transmission lines as it seeks to expand overseas.

The investment includes a 30-year concession to operate the Brazilian power grids that can be renewed for 20 years once it expires, according to a notice seen Wednesday on the website of the Chinese government agency that manages state assets.

The deal marks a further expansion of State Grid into overseas markets following a $3.9 billion, 25-year contract with the Philippines to run that country's power grid.

Though not well known abroad, State Grid says it is ranked eighth among the Fortune 500 and operates power lines across 26 of China's 32 provinces and regions. It is among many state-owned businesses that are heeding the government's call to "go out" by investing overseas.

The investment in Brazil will suit the "strategic cooperation" between the two countries and is expected to yield an average annual profit of $110 million, State Grid said.

Brazil relies heavily on power from Itaipu, the world's second-largest hydroelectric dam after China's Three Gorges. It has faced intermittent blackouts in recent years, though the government says it has invested heavily in transmission lines since President Luiz Inacio Lula da Silva took office in 2003.

State Grid's own networks are facing troubles over shortages of coal and gaps in demand and supply that oblige many cities to ration or cut power. Wide areas were left without power nearly three years ago due to icy winter weather that downed transmission lines and towers in central China.

[Associated Press; By ELAINE KURTENBACH]

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