State Grid/ElectraNet

State Grid Corp of China invests in Australia

State Grid Corp of China buys a 41% stake in South Australia's electricity supplier ElectraNet, while CK Life Sciences buys Cheetham Salt from Australia's Ridley Corp.
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A 640km ultra high voltage pilot project that starts in Shanxi province
<div style="text-align: left;"> A 640km ultra high voltage pilot project that starts in Shanxi province </div>

In the latest overseas energy acquisition bid, State Grid Corp of China plans to buy a 41% stake in South Australian electricity supplier ElectraNet for A$500 million ($523 million).

State Grid signed an agreement with Powerlink, which operates the Queensland transmission grid, to buy its interests in ElectraNet, South Australia’s electricity transmission grid operator. The transaction is scheduled for completion by the end of 2012. Barclays is advising State Grid on the transaction.

“We see ourselves as a long-term strategic partner in ElectraNet,” said Sun Jinping, chief investment director of State Grid.

State Grid also noted in its announcement of the deal that it is committed to continuing the company’s local operations, and that it will be “business as usual” for ElectraNet’s management and employees.

“[State Grid] is committed to working together with ElectraNet’s other shareholders to ensure that it continues to provide safe, secure and sustainable energy in South Australia,” Sun said.

Indeed, M&A bankers have noted that Chinese executives shopping for energy investments overseas have become much more savvy about what they need to do and say to win the hearts and minds of potential sellers. Long-term investing, commitment to the local workforce, shareholders and board are definitely key phrases that must be in the playbook.

And State Grid is certainly an experienced shopper. In May, it announced it had agreed to buy electricity transmission assets in Brazil from Spain’s Actividades de Construccion y Servicios for $531 million and assume debt of $411 million.

It also signed a deal earlier this year to buy a 25% stake in Portuguese power grid operator Redes Energeticas Nacionais SGPS for $508 million.

In December 2010, it spent nearly $1 billion buying up seven Brazilian power transmission concessions. And in January 2009, a consortium led by State Grid won an auction for a 25-year operating licence for $3.95 billion.

Cheetham Salt
Barclays is also advising on the sell-side of another Australian acquisition that was announced yesterday: CK Life Sciences’ A$150 million ($157 million) purchase of Cheetham Salt from Ridley Corp.

The sale price is considerably below the A$250 million figure that was rumoured earlier in the year, despite the reported interest of several other Asian trading houses.

CK Life Sciences is part of Li Ka-shing’s Cheung Kong group. It is involved in the business of research and development, commercialisation, marketing and sale of health and agriculture products.

The Hong Kong-listed company is making the acquisition through Maehtech, an indirect wholly-owned subsidiary.

Cheetham is the biggest producer and refiner of solar salt in Australia, for use in water treatment, food manufacturing and<div style="text-align: left;">

swimming pools.

Through its joint venture with Dominion Salt, it is also the biggest solar salt refiner in New Zealand and is now an established refiner and distributor of salt products in Indonesia. It owns brands such as Saxa, Mermaid, Kooka and Crown.

It produces roughly 1.2 million tonnes of salt a year, according to Ridley’s latest annual report.

Ridley, which is listed in Australia, announced in February that it was planning to divest its salt business and invited bidders in July. Two of its salt fields will be transferred out of the Cheetham business before the acquisition. Excluding these properties, the company had normalised earnings (before interest, taxes, depreciation and amortisation) of A$25.4 million for the year to June 30.

That implies CK Life Sciences is paying slightly less than six times Cheetham’s 2012 Ebitda.

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