China Southern Power Grid in Talks for $4 Billion Taqa Stake

(Bloomberg) -- China Southern Power Grid Co. is in talks to acquire about a 10% stake in Abu Dhabi National Energy Co., the oil-rich emirate’s biggest utility, people with knowledge of the matter said.

The Chinese state-owned firm is in discussions with banks about financing for the potential purchase, said the people, who asked not to be identified as the information is confidential.

Shares in the company, known as Taqa, rose as much as 3.7% to a three-week high on Thursday. A 10% stake could be worth about $4.3 billion based on its current share price.

If successful, the transaction would be the biggest overseas acquisition by a Chinese company this year, according to data compiled by Bloomberg.

Abu Dhabi has been working with an adviser as it considers selling a 10% holding in Taqa, Bloomberg News reported in April. Initial non-binding bids were expected to be submitted in May, people with knowledge of the matter have said. Shares in Taqa have fallen about 2% this year, giving the energy company a market value of about $43 billion.

While negotiations are ongoing, there’s no certainty that China Southern Power Grid will reach an agreement and another buyer could still emerge, the people said.

Taqa referred queries to its controlling shareholder, Abu Dhabi sovereign wealth fund ADQ. A representative for ADQ wasn’t immediately available to comment, while a spokesperson for China Southern Power Grid didn’t immediately respond to a request for comment.

Abu Dhabi, the capital of the United Arab Emirates, has been seeking to attract foreign capital by selling stakes in some of its largest companies. In recent years, international and local funds have invested more than $20 billion in the operations of state-owned Abu Dhabi National Oil Co.

The Abu Dhabi government has been pushing to turn Taqa, which has a monopoly on power and water distribution in the emirate, into a regional utility champion. Last year, it orchestrated a plan for Taqa to receive assets from state-owned holding company Abu Dhabi Power Corp., known as ADPower, in return for stock.

Taqa’s plans to cut exposure to oil and natural gas assets and focus on renewables also appeal to international investors. The company wants to boost the portion of its power produced from solar and wind to 30% over the next decade. Taqa already owns one of the world’s biggest solar plants in Abu Dhabi and is in the process of building an even larger one.

China Southern Power Grid in 2018 bought a 25.5% stake in Luxembourg’s Encevo SA, which manages electricity and gas grids and sells energy through its subsidiaries. The state-owned firm also acquired a 27.8% interest in the parent of Transelec SA, Chile’s main power line company, for about $1.3 billion in the same year.

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