State Grid of China’s offer to acquire Brazil’s CPFL Renovaveis judged too low

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The State Grid Corporation of China (State Grid), which is China’s largest state-owned grid operator and power utility, last year offered to buy a majority stake in the Brazilian renewable energy company, together with its parent company, CPFL Energia, Brazil’s biggest non state-owned company of electric energy generation and distribution.

According to a press release from CPFL Energia, however, the IPO of State Grid to acquire the interests from minority shareholders has been deemed too low by the Securities and Exchange Commission of Brazil (CVM), which has suggested increasing the value per share for the transaction from 12.20 BRL ($3.7) to 16.69 BRL.

This means State Grid will have to pay another 1 billion BRL (around US$307.1 million) to complete the transaction, according to Brazilian financial portal Valor.

The unit’s minority shareholders had questioned the value of State Grid’s offer last October, according to an article published by Reuters at the time. The shareholders included Patria Investimentos Ltda, Grupo BTG Pactual, German Bank, DEG and the World Bank’s International Finance Corporation. Reuters revealed that these shareholders had asked for a share price of 16.74 BRL.

CPFL Energia said in a press release that State Grid Brazil Power Participações S.A., the Brazilian subsidiary of the Chinese group, will now challenge CVM’s decision.

State Grid, on the other hand, had agreed to acquire a 54.6% stake in CPFL Energia in January 2017, by buying around $3.5 billion of shares from minority shareholders. Overall, the value of the transaction to take control of the Brazilian energy group and its renewable energy unit was about $5.6 billion.

As of the end of December 2017, CPFL Renovaveis, which had the largest share in the distributed generation solar segment in Brazil in 2016, according to a report from local consultancy, Greener, has revealed plans to install around 450 MW of solar in the country over the next few years.

The company has also recently created a new unit, Envo, which will specialize in installing residential and commercial PV systems in the state of Sao Paulo.