CTG’s interest in EDP is fading away. IPO’s failure makes company’s shares free dive on the stockmarket

  • ECO News
  • 2 November 2018

The Chinese are losing interest in EDP, after having faced countless financial, political and regulatory obstacles during the negotiation period. of the public tender offer to the Portuguese company.

Over the last few months, there have been many obstacles questioning the sustainability of the takeover bid from China Three Gorges, to the Portuguese energy company, EDP, according to Bloomberg’s sources.

This Friday morning, the company’s shares were falling by 1.8% to €3,062, with the Portuguese utility company heading the downward spiral witnessed in the national markets.

The takeover bid involves millions of euros being invested in EDP, coming from the Chinese, and in early September it had been put on hold due to major changes in the administration of China Three Gorges.

However, the Chinese offer to get 50% of the Portuguese utility is still on the table, and according to Bloomberg’s sources, the final decision on this €9.1bn deal will only be made once the details on the regulatory requirements and demands are clearer.

The deadlines for European and North-American regulators to approve the transaction have been re-scheduled to the beginning of next year, according to two sources.

China Three Gorges said that the company is still “focused on working with their advisors in terms of negotiations, with regulators regarding certain jurisdictions, and with the fulfilment of certain requirements regarding some of the offers they intend to present” to EDP and EDPR. “The current deadlines and calendar of approvals from regulators are in line with those used in other comparable operations, in terms of dimension and complexity”, they highlighted.

As ECO noted before, there are certain regulatory and political bottlenecks that threaten the success of CTG’s takeover bid. Although the Chinese government did not clarify the reasons behind the readjustments to the company’s administration, some of ECO’s sources confirmed that Beijing has a different target in the utility sector: the priority for the Chinese is not so much production, but rather investing in other companies that distribute energy, such as REN, on which the Chinese have already invested, buying 25% of the company’s shares, through their state-owned enterprise, State Grid.

State Grid’s involvement in REN, the energy distributor, is making CTG’s job of getting EDP’s shares all the more difficult, as this poses an enormous regulatory issue in terms of European directives, which state that a clear separation between the production and commercialization of energy, meaning that the Chinese might have to abdicate of REN to get EDP. Still, that idea doesn’t seem to please the Chinese government.

More signs of difficulties were clear as soon as CTG hired Citigroup, a North-American bank, to be in charge of the consulting for CTG’s takeover bid to EDP, as it showed that the Chinese company was not prepared to face such a demanding operation as this had turned out to be.

Xi JinPing, the President of China, is visiting Portugal next month, and it is expected that the visit brings new developments to the business deal, and the business relationship between both countries.

The Portuguese Prime-Minister reacted, saying that he “had nothing to say against China’s takeover bid”, after having announced publicly that the Chinese have been “very good investors in Portugal”.