Foreign know-how

China claims controversial stake in Germany’s power grid

File photo of a worker inspecting solar panels at a solar farm in Dunhuang, 950km northwest of Lanzhou, Gansu Province
A powerful vision: Solar panels in northwestern China. Source: Reuters

To hear critics tell it, the Chinese are taking over part of Germany’s power grid and stealing German technology. But if one listens to Boris Schucht, the CEO of German grid operator 50Hertz, then the fact that the State Grid of China Corporation is taking a 20-percent stake in his company is a good thing.

50Hertz is one of four operating the German grid, serving around 18 million customers mostly in northern Germany, and has been moving toward more environmentally friendly energy for some time, with the support of its shareholders. And, as Mr. Schucht says, “we want to progress in this area with an expanded group of partners.”

As it is, 50Hertz is already wholly foreign-owned, in a 60/40 split between Elia, the Belgian grid operator, and IFM, an Australian investment fund. IFM now wants to sell half its stake to SGCC, although Elia is believed to have first option to acquire the stake, usable until the end of March. If Elia does not exercise that right, the SGCC acquisition could be complete by summer. The proposed purchase price has not been revealed.

It is clear the German government is keeping a close eye on Chinese purchases.

Not everyone is as optimistic as Mr. Schucht. The State Grid of China Corporation, or SGCC, is the world’s second largest company, with annual revenues in excess of €250 billion (around $300 billion). Its aggressive expansion strategy is inseparable from Chinese plans to become the world’s leading industrial nation by 2025, by developing world-class expertise in 10 key sectors. That includes not only IT and aviation but also energy technologies.

A crucial part of that plan – dubbed “Made in China” – is to acquire overseas technology and know-how. In the last two years, this has led to a series of controversial attempts by Chinese companies to take over German technology firms.

In 2016, a successful bid by Chinese firm Midea to buy cutting-edge robotics manufacturer Kuka put the issue firmly on the political agenda. This was followed by Chinese takeover attempts at Aixtron, a semiconductor manufacturer, and Ledvance, a lighting manufacturer that was once part of the Siemens group. The Aixtron bid was eventually blocked when the German government refused security approval.

Over the last year, Germany’s law on foreign takeovers has been made more robust. The federal government can now use the Foreign Trade Law to block deals affecting key infrastructure, including telecommunications and power networks. However, the law only affects stakes of 25 percent of higher. By limiting their bid to 20 percent, the SGCC avoided the possibility of a political veto.

09 p07 Network operators in the crosshairs-01

In any case, sources close to the negotiations say that SGCC has lobbied hard and secured political backing for its bid: Discussions have been held with the federal economics ministry, state governments and individual parliamentarians and it seems the deal won’t face any political opposition. It is clear though that the German government is keeping a close eye on Chinese purchases.

Germany’s electricity infrastructure – jointly operated by 50Hertz, Amprion, Tennet and TransnetBW – is regarded as particularly innovative. Just over half – 53 percent – of the electricity generated in 50Hertz’s network is drawn from fluctuating, renewable power sources, mainly wind turbines. That is a world record for a transmission system operator. And maintaining a stable electricity supply in these circumstances is of great interest to China, which has ambitious goals to expand its own renewables production.

Transmission grid operators play a key role in Germany’s so-called energy transition and they have had to deal with extra challenges over the past few years. Nuclear power is being phased out, fossil fuel generation is being radically cut back and renewables rapidly expanded. Meanwhile, they must ensure the smooth supply and demand of electricity right across the country.

In recent years, as renewable electricity use has boomed, demands on the grid have greatly increased. More and more wind power is being generated in the windy north and north-west of the country. The wealthier south, home to many well-known industrial manufacturers, has less generation capacity but greater demand.

This has required the construction a new generation of massive “electricity super highways,” capable of delivering massive quantities of electricity from north to south with comparatively little waste. By 2030, Germany’s transmission grid operators, including 50Hertz, will have invested more than €50 billion (around $61 billion) in this technology: €30 billion on land-based networks, and €20 billion linking offshore windfarms to the main power grid.

Other German grid companies also present a mixed ownership picture: Tennet is wholly owned by the Dutch government, while almost 75 percent of Amprion is owned by German financial investors, with energy giant RWE holding 25.1 percent. TransnetBW is wholly owned by publicly-traded German power company EnBW.

 

Information and experience could move in the other direction too.

SGCC will doubtless be hoping to tap into some of Germany’s accumulated know-how about how to deal with a fluctuating power supply, due to renewables. But information and experience could move in the other direction too: China’s massive expansion of its own grid has already necessitated electricity superhighways there, given them some experience in the same area.

Some sector analysts have suggested that this could be the beginning of a gradual merger of the European and Chinese energy markets. “With electricity superhighways, the two markets could in theory be linked together,” one grid expert told Handelsblatt.

SGCC already has stakes in grid operators in Portugal, Italy and Greece, and runs the Berlin-based Global Energy Interconnection Research Institute Europe, which studies long-distance electricity transmission. This, and the SGCC’s next proposed purchase, all fits well with China’s overall strategy, which includes rapidly expanding links across Europe and Asia, in part along the route of the ancient Silk Road.

Thomas Sigmund is Handelsblatt bureau chief in Berlin, where he directs political coverage. Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. To contact the authors: stratmann@handelsblatt.com, sigmund@handelsblatt.com

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