Chinese influence

Berlin in last-ditch effort to thwart Chinese stake in 50Hertz

Neue deutsch-dänische Umspannanlage
Power up! Source: dpa

The German government is exploring ways to halt a Chinese grid operator from buying a 20 percent stake in a German rival as concern grows over China’s influence on key industries. China’s state-owned SGCC wants to buy the stake in German high-voltage energy network 50Hertz from Australian infrastructure fund IFM.

The German government is worried about SGCC’s plans because the 50Hertz grid is regarded as critical infrastructure. Although current law allows the government to block investments from non-EU countries under certain conditions, it only applies to purchases of 25 percent or more of a company.

Berlin’s hands appear to be tied. The easiest way to thwart the purchase – SGCC has already signed a purchase agreement with IFM, sources say – would be for Belgian network operator Elia, which owns 80 percent of 50Hertz, to exercise its right of first refusal on the stake by mid-July.

Elia is balking at shouldering the financial burden but the government is looking at whether or not Elia could park the stake with German reconstruction bank KfW, sources say. Other options, such as guarantees, are also under consideration in Berlin. The German economics ministry, 50Hertz, Elia and KfW all declined to comment.

19 p09 Hertz-01

Economics Minister Peter Altmaier told fellow conservative lawmakers last week he “personally has a problem” with critical infrastructure falling into the hands of investors whose real backers weren’t known and where it wasn’t clear what action they would take in unforeseeable circumstances. He mentioned 50Hertz specifically. Mr. Altmaier said this week it was unclear whether SGCC could be stopped. “I don’t know if I can do it,” he said.

50Hertz is one of Germany’s four grid operators alongside Amprion, Tennet and TransnetBW. They have a key role in Germany’s green energy revolution and plan to invest billions of euros in expanding the power grid in the coming years, building lines capable of shifting renewable power from the windy north to the industrial south and west.

50Hertz in particular has world-renowned expertise in integrating renewables into the grid.

Try, try again

SGCC operates the world’s biggest high-voltage network and covers 80 percent of the Chinese market. It employs some 900,000 people and has stakes in firms in South America, Australia, the Philippines, Italy, Portugal and Greece.

This is SGCC’s second attempt to buy a 20 percent stake in 50Hertz after a previous bid failed in March. That stake too had been put up for sale by IFM, which then still held 40 percent. Elia swooped in and bought it instead, raising its stake to 80 percent, following pressure from the German government.

The Belgians paid close to €1 billion ($1.16 billion) for that tranche — a lucrative deal for IFM, which industry sources said paid only one sixth of that sum when it purchased it in 2010. Given that, it’s little wonder that Elia is balking at stepping in a second time.

Thomas Sigmund is the bureau chief in Berlin, where he directs political coverage. Klaus Stratmann covers the energy market and is deputy chief of Handelsblatt’s political desk in Berlin.To contact the authors: sigmund@handelsblatt.comstratmann@handelsblatt.com

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