SOE in $2.9b deal with Italian energy giant Enel for South American assets

China Southern Power Grid's acquisition of Italian firm Enel's power distribution and technology assets in Peru is seen by experts as another move to further expand its presence in South America.

Businesses of China Southern Power Grid, or SPG, cover five areas in China, including Guangdong, Yunnan, Guizhou, Hainan provinces and the Guangxi Zhuang autonomous region. In recent years, the company has accelerated the construction of digital power grids to lead the development of green energy in these areas.

The international subsidiary of the State-owned electricity enterprise has struck a $2.9 billion deal with Italian energy giant Enel to offload the Italian company's distribution, supply and energy services assets, according to a statement released by Enel on Friday.

Under the agreement, Enel's Peruvian subsidiary will sell its entire stake of 83.15 percent in power distribution and supply company Enel Distribucion Peru and 100 percent of Enel X Peru, which provides advanced energy services, the statement said.

This acquisition will further expand SPG's footprint in South America, which has massive potential to develop in the power grid sector, said Lin Boqiang, head of the China Institute for Studies in Energy Policy, Xiamen University.

Chinese utility companies have advantages in power grid technology, such as ultra-high voltage (UHV) transmission technology. While the deal can help reduce Enel's consolidated debt, it will also further export China's power grid technology abroad, Lin said.

The power infrastructure in South America, including Chile and Peru, has a lot of potential to be tapped and is considered a growth market. The investment and layout of power grid infrastructure will also further drive the export of Chinese enterprises' technology, equipment and capital while forming industry alliances to jointly tap the overseas market, he said.

According to Enel, the deal aligns with its 2023-25 strategic plan announced earlier, in which it plans to exit some geographies and businesses that no longer fit its development strategy, aiming to maximize the company's value.

The sales completion awaits the nod of the competent antitrust authority in Peru, it said.

According to Enel Group CEO and General Manager Francesco Starace, the transaction will help Enel maximize the value of the investments carried out so far in grid digitalization and advanced energy services in Peru.