China builds an empire of electricity with Australia as target

It generates more revenue than Apple Inc. and Boeing Co. combined and serves one in seven people on the planet. Meet State Grid Corp. of China, a company that may be buying power assets near you.
While State Grid is hardly a household name, its geographic footprint extends from South America to Australia, where it’s a contender to acquire a stake in Sydney-based power network Ausgrid. Hungry to grow outside China, the company plans to develop a USD50 trillion global energy network that could enable electricity to be transmitted beyond continental boundaries.
“If railway, road and Internet can link the whole world, why can’t an energy network be built?” Chairman Liu Zhenya said last week in an interview in Beijing. “The problem right now is just that people need to embrace new ideas and not let the old thinking stand in the way of new innovation.”
State Grid’s expansion ambitions will be limited only by the opportunities available to it, not by cash, Liu said. The Beijing-based company, which is wholly owned by the government of China, can help upgrade electricity grids and other infrastructure, and bring new power-transmission technology to the countries it’s targeting, he said.
The company’s interest in Ausgrid comes amid a wave of Chinese investment in Australia, from cattle ranches to natural gas. Buyers from China announced about A$8.5 billion ($6.5 billion) in acquisitions of Australian companies last year, the most in at least 12 years, according to data compiled by Bloomberg. While such investment is vital as Australia seeks new growth drivers following a decade-long mining boom, it’s stoked security concerns and community unease, particularly over sales of farmland and real estate.
State Grid, which says it has about 1.9 million employees and 1.1 billion customers, generated more than $50 billion in cash from operations in its latest fiscal year, according to data compiled by Bloomberg. Its annual sales of more than $330 billion make it the world’s biggest utility and put it ahead of Toyota Motor Corp. and Exxon Mobil Corp.
“It’s an increasingly significant company and making some extremely sizable investments,” said Joseph Jacobelli, an analyst at Bloomberg Intelligence in Hong Kong.
Countries in which State Grid has bought power assets include Brazil, Australia, the Philippines and Italy, where it bought a stake in CDP Reti in a $2.8 billion deal in 2014. “You’ve got a brand new player in town and a new capital injection source, which you didn’t have five or 10 years ago,” Jacobelli said.
In Australia, State Grid owns stakes in electricity companies Jemena Ltd, AusNet Services and ElectraNet Pty. The 50.4 percent holding in Ausgrid, which the New South Wales state government is selling, could fetch more than A$10 billion, people with knowledge of the matter said in February.
State Grid will actively bid for Australia’s power assets, Chairman Liu told a briefing in Beijing on Wednesday, without identifying any targets.
“Australia ticks an enormous number boxes for State Grid,” said Jacobelli, adding that the company would be a logical buyer of Ausgrid. James Paton, Bloomberg