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The Associated Press December 22, 2011, 12:02PM ET

Portugal in $3.5 bln utility stake sale to China

Portugal is selling the state's 21.35 percent stake in national utility Energias de Portugal to China Three Gorges Corp. for euro2.7 billion ($3.5 billion), officials said Thursday.

Three Gorges Corp. beat rival bids from German gas and electricity company E.On AG and Brazilian utilities Eletrobras and Cemig SA in what was Portugal's biggest-ever privatization.

The deal announced was the first in a raft of sell-offs that aim to earn at least euro5 billion and ease Portugal's crippling debt burden. The country needed a euro78 billion ($102 billion) bailout earlier this year to avoid bankruptcy.

Cash-rich Chinese companies have in recent years made a string of investments in European countries hit by the continent's sovereign debt crisis.

Luis Marques Guedes, a spokesman for the Portuguese Cabinet, said Three Gorges Corp. gives EDP "a financial strength and ability to invest ... that it didn't have."

The Chinese company promised to invest in developing EDP's manufacturing capacity for renewable energy equipment and in Portugal's green energy sector, potentially lifting its total investment to euro8 billion, Secretary of State for the Treasury Maria Albuquerque told a news conference.

Three Gorges Corp. will also help EDP find business in new markets, Albuquerque said.

She said Three Gorges Corp. paid a 53 percent premium on EDP's share price on Wednesday. The Chinese company becomes EDP's largest shareholder. EDP's share price surged 3.5 percent Thursday before the Lisbon Stock Exchange suspended trading in its stock.

The deal is subject to regulatory approval. Details of the other bids were not made public.

EDP runs electricity and gas operations in 13 countries, including six European countries outside Portugal, Brazil and the United States.

It has also developed green energy projects, especially wind energy, through its subsidiary EDP Renovaveis.

Its turnover last year was euro14.2 billion, which generated a net profit of just over euro1 billion. It had net assets of euro40.5 billion and around 12,000 employees, according to its 2010 annual report. It also has euro16.3 billion in net financial debt.

The purchase follows a pattern of European business investments by Chinese companies in recent years.

In January, Sinopec bought around $7 billion worth of Brazilian oil assets held by Spanish energy company Repsol, giving birth to one of Latin America's largest energy companies.

Last year, Internet service provider Tiscali SpA and Zte, a Chinese maker of telecommunications equipment, signed a deal for the development of ultra-wideband in Italy and French companies won deals with China worth $22.8 billion.

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