State Grid Corporation of China (SGCC), the world's largest utility company by revenue, on Thursday agreed to buy a 35 percent stake in Italian energy grid unit Cassa Depositi e Prestiti (CDP) Reti for 2.1 billion euros ($2.8 billion), in one of the biggest investments in Italy by a Chinese company.
The stake in the deal will be sold to State Grid International Development Ltd (SGID), a wholly-owned subsidiary of SGCC. CDP Reti is wholly owned by CDP, a state holding company.
Liu Zhenya, chairman of the SGCC, said at the ceremony that the investment in CDP Reti is yet another breakthrough in the company's overseas strategy and the company's second-most important investment in Europe after power grid operator REN in Portugal in 2012.
The move follows a series of European infrastructure acquisition by Chinese State-owned titans whose investments have spanned across Europe. Among them are the People's Bank of China's partial acquisition of Italian energy companies Eni and Enel in March and Shanghai Electric Group's stake purchase in power engineering firm Ansaldo Energia.
Chinese companies and individuals made outbound direct investments worth $43.34 billion from January to June, down by 5 percent from the same period last year, in 146 countries and regions, the Ministry of Commerce said on July 15.
As of June 2014, SGCC's overseas assets amounted to over $23 billion, the company said in its statement. The profit yielded from its overseas investment grew from less than 800 million yuan ($128.08 million) in 2009 to 3.2 billion yuan in 2013, an increase of 309 percent, the company said.
SGID will appoint two board directors for the five-member board of CDP Reti and dispatch two finance officers to the company, according to a statement of the company e-mailed to the Global Times.
SGID will also nominate one board member for both gas transport group Snam and power grid Terna. The two firms are partly owned by CDP Reti.
"Against the backdrop of economic globalization, companies should not be satisfied in being a successful regional player. They must walk out of their national border and mingle with the world," Liu Zhenya said in the statement.
"We position ourselves as a long-term strategic investor in the overseas market, and our starting point is the stable operation of business and rewards over the long term," the statement said, citing a manager of SGID.
Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said this is a milestone in State Grid's "go out" strategy.
"Top Chinese companies will in the future become top multinational companies in the world, and overseas mergers and acquisitions like this one are necessary steps to that status," Lin told the Global Times.
But Lin warned of the risks from the operation of the assets. "No one will sell an infrastructure project if it is a cash cow," Lin said.
SGCC invests, builds and operates a grid that covers over 88 percent of China's territory, serving over 1.1 billion people. It ranked 7th among Fortune Global 500 companies in 2014 with revenue of $333.38 billion.
In 2013, SGCC acquired SP AusNet, a power company in Australia formerly owned by Singapore Power International. The company also bought 60 percent of SPI (Australia) Assets Pty Ltd, another Australian power company.