SANTIAGO – Chile’s competition regulator has approved the acquisition of energy company CGE by Chinese state-owned company State Grid. The deal allows China to control over half of Chile’s electricity market. While many in the government and opposition cheer the deal, others are growing wary.
Competition regulator FNE has unconditionally approved China’s State Grid’s US$3 billion acquisition of electricity grid company CGE from Spain’s Naturgy. The deal was announced in November 2020 and regulatory approval came on Mar. 31.
With the move, China attains predominance in the national transmission segment. China is Chile’s main trade partner, and Chinese firms have already interests in salmon farming, lithium production, and even vineyards.
But concerns are growing about foreign control of strategic areas.
A congressional commission studied the acquisition plans and raised concerns with public prosecutor Ricardo Riesco. Socialist legislator Jaime Naranjo opposed the deal, as he and a cross-party group proposed a bill to regulate investments by foreign state-owned enterprises in assets deemed critical infrastructure. According to the bill, such investments would require two-thirds of Congress to approve.
La FNE aprobó sin condiciones la operación de concentración consistente en la compra de la Compañía General de Electricidad S.A. (CGE) y CGE Servicios S.A. por parte de State Grid International Development Limited (SGIDL). https://t.co/gndjVPvYdm pic.twitter.com/k8fv2mfGRX
— FNE_Chile (@ChileFne) March 31, 2021
Yet, Riesco told lawmakers that under the current law he cannot stop foreign state companies from investing. He could reject the deal only if it was a threat to competition.
China’s Power Hunger
In early 2020, State Grid purchased electricity supplier Chilquinta for US$2 billion. Together with the CGE deal, the Chinese-owned company will now serve 57 percent of Chilean consumers. Moreover, another Chinese state enterprise, Southern Power Grid, bought 28 percent of Chilean energy company Transelec. In 2019, Chinese firm Tianqi acquired 24 percent of Chilean mining company SQM.
China is also strongly engaged in Argentina, Brazil, Ecuador, and Venezuela, and some Caribbean countries have even severed diplomatic ties with Taiwan to please Beijing and receive investments. While some Chilean lawmakers seem determined to avoid critical infrastructure falling under the control of other states, reversing the State Grid deal is unlikely. Any moves in this direction could also turn out costly – not just in money terms.
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Francisco is finishing his degree in Journalism at Universidad Finis Terrae in Santiago.