LatinFinance - September/October 2017 - 57

CHINA
ENERGY

Some of China's biggest power companies are starting to look beyond
acquisitions to greenfield projects in Latin America. By Thierry Ogier

Making a splash

Source: Shutterstock

ising infrastructure investments have confirmed China's interest in
forging links with Latin America beyond
buying commodities, and energy projects
have been at the heart of the developing
relationship.
Brazil, with its rushing rivers, eager
consumer base and local construction and
funding resources, has attracted particular
attention from China's massive state-owned
enterprises. "Brazil is a top destination for
these companies, but it is also a showcase. It
is part of a broader Chinese plan for infrastructure investment and diversification in
the region," says Margaret Myers, director
of the China-Latin America Initiative at the
Inter-American Dialogue, a Washington
DC-based think tank. "Investments are very
limited elsewhere, where we have seen
smaller deals."
She points to opportunities in power
transmission in Ecuador and Mexico, especially with respect to the latter country's
new energy reforms. "Whether or not the
country goes for the Chinese company is
another question," Myers says.
Li Yinsheng, the head of China Three
Gorges (CTG) in Brazil, says Latin America's
largest market offers unmatched opportunities. "We have some teams in Latin America,
but Brazil is by far our priority," he says. In
fact, the company's website identifies Brazil

RUSHING IN: Chinese companies have been enthusiastic buyers of generation and transmission
assets across Latin America in recent years

as CTG's top focus globally.
The investment spree in Latin America
is part of the strategy of the Chinese government to export its experience and the
expertise of its power transmission companies, such as CTG and State Grid.
Last year, almost half of the $12.6 billion
in investments that Chinese companies
announced in Brazil related to the power
sector, according to the China-Brazil Business Council, a Rio de Janeiro-based business group. Moreover, Chinese companies
topped the M&A rankings in Brazil during
the first quarter of 2017, representing 37.5%
of total investment in the country, according
to Dealogic.
"The value of this year's deals may be
even greater than last year's," says Fernando
Camargo, a partner at the local consulting
firm LCA Consultores, adding that State Grid
has completed its acquisition of a controlling stake in CPFL Energia and also invested

in the renewable energy provider CPFL
Energia Renováveis. Other transactions are
pending. "We are going to have more news
in terms of large Chinese investment in this
sector," Camargo says.
Chinese whirlwind
China's state-owned companies have taken
the Brazilian market by storm in recent
years. State Grid has invested heavily in
power transmission since the beginning of
the decade, including transmission lines
between the Belo Monte power station in
the Amazon and the industrialized southeast region. CTG started monitoring the
Brazilian market closely in 2010 and set up
a subsidiary in the country three years later.
"We did enough work before we started
taking action," Li says.
Within the past four years, CTG has
invested 23 billion reais ($7.2 billion) and
is generating 8.27 GW, mostly from hydroSeptember/October 2017 L ATINFINA NCE.COM 57

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