Image: CGE

China’s State Grid International Development is to acquire Naturgy’s Chile subsidiary Compañía General de Electricidad (CGE).

Spanish energy company Naturgy’s 96.04% stake in CGE will cost State Grid €2.57 billion ($3.05 billion) payable in cash once the transaction is completed, which is expected before the end of February 2021.

According to a company statement, the operation will mean a reduction in Naturgy’s consolidated net debt of approximately €4 billion euros ($4.75 billion), providing the company with significant financial capacity to address growth opportunities linked to the energy transition.

“The agreement reached today allows us to move decisively forward in our transformation and represents an important first step in our asset rotation objectives that will allow us to be more ambitious in our investment and growth plans,” said Naturgy President, Francisco Reynés in the statement.

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“We want to be a leading company in the energy transition at a global level and this transaction provides us with strategic flexibility and greater financial capacity for growth.”

Reynés adds that the company’s investment in assets “must be guided by the search for predictability and focused on projects that contribute to the energy transition and on geographies and regulatory frameworks with greater stability.”

Naturgy acquired its share in CGE in 2014. Other countries in Latin America in which the group has a presence, alongside its activities elsewhere in the world, are Argentina, Brazil, Colombia, Costa Rica, Dominican Republic, Mexico and Panama.

CGE headquartered in Santiago is the largest energy distributor in Chile, providing electricity and gas to 2.6 million customers amounting to approximately 40% of the market.

The deal is subject to the standard approvals, which are unlikely not to be granted.

Commenting, Minister of Energy Juan Carlos Jobet, said: “We hope that the investors who come to our country have a long-term vision and that they make the necessary investments to provide a good service and improve the quality of life of Chileans. This announcement is a clear and new sign that investors are looking favourably on the modernisations of the energy sector and that they trust the institutions and the rules of the game in our country.”

China has been making steady inroads into Latin America in areas including mining, agriculture and electromobility.

State Grid International Development is a subsidiary of State Grid Corporation of China. CGE is the company’s second utility investment in Chile following the acquisition completed earlier this year of Chilquinta Energia – the country’s third-largest utility – from Sempra Energy for $2.23 billion.