Tuesday 21 October 2014

Italians plan potential €2bn energy deal with China

Published 25/07/2014 | 02:30

Italian Prime Minister Matteo Renzi shakes hands with Chinese President Xi Jinping at the Great Hall of the People in Beijing. Renzi visited China last month to encourage investment. Photo credit: WANG ZHAO/AFP/Getty Images
Italian Prime Minister Matteo Renzi shakes hands with Chinese President Xi Jinping at the Great Hall of the People in Beijing. Renzi visited China last month to encourage investment. Photo credit: WANG ZHAO/AFP/Getty Images

Italy's state lender, Cassa Depositi e Prestiti (CDP), says it is in advanced talks to sell a 35pc stake in energy grid holding company CDP Reti to China's state grid. The deal could be worth some €2bn.

CDP Reti, wholly owned by CDP, owns a 30pc stake in gas transport group Snam and will soon receive a similar stake in power grid Terna.

CDP gave no financial details of the deal but Italy's economy minister Pier Carlo Padoan said the transaction could be worth about €2bn, making it one of the biggest Chinese investments in Italy.

The planned sale is part of Italy's efforts to sell off state assets to help reduce the country's public debt and to raise funds to invest in infrastructure projects.

CDP is negotiating with State Grid International Development Ltd, a wholly owned subsidiary of China's state grid.

The state lender's chairman Franco Bassanini said at a press briefing in Beijing that the agreement was likely to be signed by the end of July.

Encourage

Italy has been urging China to invest more in Italy for a number years and the prime minister, Matteo Renzi, visited the country last month to encourage investment.

Power and gas networks have become an attractive asset class in recent years as their return is regulated by governments, giving investors a predictable source of income even when the economy is struggling.

With the purchase of a stake in CDP Reti, State Grid, which distributes power to 1.1 billion people across nearly 90pc of China, would gain access to a stable flow of dividends, said Mediobanca Securities's analyst Javier Suarez, adding that this was very attractive at a time of low interest rates in Europe. (Reuters)

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