Three Gorges eyes overseas M&A deals
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E-mail China Daily, May 21, 2015
The builder and operator of the world's largest dam, China Three Gorges Corp, will seek merger and acquisition opportunities globally to bolster its presence overseas.
"We are looking for possible acquisitions in markets such as Latin America and Europe, since our last purchase involving a Portuguese utility company has performed well," Executive Vice-President Lin Chuxue told China Daily on the sidelines of the 2015 World Hydropower Congress, a three-day event held by the International Hydropower Association in Beijing.
In 2011, CTG took a 21.35 percent stake in Energias de Portugal SA for 2.69 billion euros ($2.99 billion) and became its single largest shareholder. It was the first acquisition of this type for the Chinese company.
The total installed capacity of the projects involving overseas investment by CTG is about 6,000 megawatts, but the company plans to raise that figure to 25,000 mW over the next several years. That figure is approximately equal to the full capacity of the Three Gorges Dam project, which spans the Yangtze River in Hubei province.
As of the end of 2014, the company had invested in and signed contracts to build 81 overseas projects.
CTG President Wang Lin said that the company's strength lies in its rich domestic experience. By 2020, he said, five of the 10 largest hydropower stations in the world would have been built, operated and owned by CTG. The company hopes to leverage this experience to boost exports.
"From exploration and design to technology, equipment manufacturing and funding, we have advantages across the whole industrial chain, which gives us a competitive edge in winning bids in the international market," Lin said.
The government's "Belt and Road Initiative" offers more opportunities to the Chinese hydropower company, which aims to expand in regions such as Southeast Asia, Africa, Europe and Latin America.
The initiative refers to President Xi Jinping's proposal to build the Silk Road Economic Belt on the Eurasian continents and the 21st Century Maritime Silk Road.
The company is giving priority to Pakistan and Brazil in its overseas investment portfolio, and it is pursuing multiple hydropower projects in the two countries, Lin said.
In Pakistan, hydropower accounts for 30 percent of the energy mix, with oil and natural gas making up the remainder. However, with a shortage of domestic oil resources, demand for hydropower is soaring.
CTG has drawn up a $15 billion plan to build hydropower projects as well as wind and solar facilities, which will ease energy shortages in Pakistan that have constrained economic growth.
The company plans to build hydropower and wind projects in Brazil with total installed capacity of 3,000 mW.
'Golden era' for hydropower projects
The hydropower sector in China is enjoying a "golden age" with the nation's plans for capacity expansion this year and to cut carbon emissions, industry officials said on Wednesday.
China has set a target of having non-fossil fuels make up 15 percent of its total energy use by 2020. To achieve this goal, the country will need to rely on hydropower, Zhang Jun, deputy general manager of the northwest branch of China Power Investment Corp, said on Wednesday during the 2015 World Hydropower Congress in Beijing.
CPIC is a State-owned power generation enterprise.
"We are in a golden age for the development of hydropower, because it has many advantages over other energy sources," he said. "The benchmark price for hydropower is very low and unlike solar and wind power, hydropower is a very stable source."
The nation's installed hydropower capacity was 300 gigawatts in 2014, or 67 percent of the total renewable generation capacity. China aims to have 420 gW of hydropower capacity by 2020, up from an earlier target of 380 gW, according to the National Energy Administration.
Several new hydropower projects, including dams on the Jinsha River, as the northern section of the Yangtze River in Yunnan province is known, are expected to start construction this year, said Zhang Boting, deputy secretary-general of the China Hydropower Engineering Society.
But he warned there could be a surplus of hydropower capacity in the southwestern regions such as Yunnan and Sichuan provinces due to poor grid access.
He also said that the industry is being held back by issues like environmental protection and resettlement of local residents, which raise costs.
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