PATRICIA DE MELO MOREIRA
So it's true - China is going to bail out the euro zone, after all. And how! This week's sale of a stake in Energias de Portugal to China Three Gorges Corp for €2.7-billion offers one route to doing so: a resource-hungry Chinese energy producer looking for a bargain (as Beijing sees it) from the sale of state assets that the debt crisis has provoked. Portugal was lucky - rich buyer, attractive target. Other governments may not be.
CTG is paying the equivalent of €3.45 a share for its 21 per cent stake in EDP - a 53 per cent premium over the pre-announcement close. That is because EDP offers CTG two valuable assets - renewable-energy technology and the prospect of expansion into Latin America. About 40 per cent of EDP's earings before interest, tax, depreciation and amortisation in the first nine months of 2011 were from wind power and Brazil. CTG is also offering a further €2-billion investment in wind farms and a €2-billion credit facility for EDP, enhancing its attractions.
This transaction is no template for future euro zone privatizations, however. Electricity producers in other debt-laden countries such as Ireland or Greece lack EDP's international profile, for starters. Even China would balk at buying small operators entirely dependent on domestic markets. EDP is also arguably Portugal's most attractive asset; from now on Lisbon is more likely to be competing with Athens for buyers' attentions. Greece is currently trying to sell a €50-billion portfolio of state assets, but it mainly includes buildings, ports and an abandoned airport. Nor is privatization necessarily the answer to indebted countries' problems. In many cases, it will provide the cash to service rather than pay down debt. For example, Portugal needs €39-billion of financing in 2012, according to the International Monetary Fund.
The euro zone's New Year sale will not be a bargain for anybody.