China State Grid expands in Australia through Singapore Power

China State Grid, the country’s biggest utility group, has made further acquisitions in the Australian energy market. It has agreed to pay Singapore Power A$824 million ($810 million) for 19.9% of SP AusNet and 60% of SPI Australia Assets (SPIAA).

The purchases come after State Grid paid A$500 million last November for a 41% holding in South Australian electricity supplier ElectraNet. The Chinese state-owned company intends to spend between $30 billion and $50 billion by 2020 buying assets throughout the world, and has also recently bought stakes in Brazilian, Philippine and Portuguese transmission firms.

SP AusNet is a listed company that manages three electricity networks in Victoria, and SPIAA is a private company that holds Singapore Power’s other energy assets. The price paid for SPIAA, which recorded net sales of A$1.7 billion to March 2012, was not disclosed.

State Grid transmits electricity to around 90% of China and earned revenues of more than $300 billion last year. However, price controls exert pressure on the firm’s profitability, so it is looking for opportunities overseas.

The Australian acquisitions “are strategic and in line with State Grid’s objective to buy diverse assets in benign regulatory environments”, says a person familiar with the transactions.

The acquisitions are subject to government and regulatory approvals in China and Australia.

Macquarie and Goldman Sachs advised State Grid, and Singapore power was advised by Credit Suisse and Lazard.

Singapore power’s holding in AusNet will fall from 51% to 31.1%, but State Grid said that it will make no substantial changes to the company’s operations or management team.

AusNet owns more than A$10 billion of power distribution assets and has 1.3 million customers. Its share price rose nearly 2% on Friday.

State Grid is also rumoured to be interested in New Zealand utility firm Brookfield Infrastructure Partners. Last week, State Grid began marketing its first bond issue to international investors, and plans to raise $2 billion to add to its war chest.