China power giant says money no issue for overseas expansion

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Liu Zhenya, chairman of State Grid Corp. of China. Photographer: F. Carter Smith/Bloomberg Liu Zhenya, chairman of State Grid Corp. of China. Photographer: F. Carter Smith/Bloomberg

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When it comes to overseas expansion, money’s not a concern for China’s power-grid giant.
State Grid Corp. of China’s ambitions are limited by the quality of assets it can find rather than how much cash it can spend, according to its chairman. The company reaped $13.3 billion in profit last year on more than $300 billion in sales, Liu Zhenya said in an interview Monday in Beijing. The company, which employs about 1.9 million people and distributes electricity to 1.1 billion, can also rely on its sovereign-grade rating for low-cost financing, he said.
“Money won’t be the issue standing in the way of us making international acquisitions,” Liu said. “We are capable of buying sizable assets that fit into our portfolio.”
 
State Grid, whose revenue trumps the likes of Volkswagen AG and Apple Inc., is looking overseas as President Xi Jinping seeks to overhaul the nation’s bloated state-owned businesses and allow market forces to play a bigger role in the world’s second-biggest economy.
Developed countries provide mature markets and clear regulations, though acquisition opportunities are scant, Liu said. Meanwhile, the better growth opportunities in developing nations come with higher political risks, he said.
$50 trillion network
China’s biggest electricity distributor was among suitors planning to submit bids for Australian power network Ausgrid, people with knowledge of the matter said last month. The utility has already invested in countries including Brazil, Australia, Italy and the Philippines in a bid to diversify and gain technical knowledge, according to a Bloomberg Intelligence report in November.
Liu said the company is moving ahead with plans to spend 2.3 trillion yuan ($355 billion) in the next five years to expand its transmission network, a 28 percent increase over the previous period. The Chinese company is also continuing its push overseas, seeking investments everywhere from South America to Africa.
China will spend more on expanding its grid, including building long-distance transmission lines, than it will on new power plants because the country already has a generating overcapacity, Charles Shum, BI analyst in Hong Kong, wrote in a report last week.
State Grid has ambitions to build an ultra-high-voltage global power network to transmit electricity from country to country and continent to continent, a goal that may cost $50 trillion to develop by 2050, Liu said earlier this year.
The chairman on Monday compared the concept of a global power link to travel between Beijing and New York City before the introduction of modern civil aviation. “A global energy network can do the same thing and turn previously impossible ideas into reality,” Liu said.

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