China Southern Power Grid in talks for Us$4bil Taqa stake

China Southern Power Grid Co is in talks to acquire about a 10% stake in Abu Dhabi National Energy Co, the oil-rich emirate’s biggest utility, according to sources.

The Chinese state-owned firm is in discussions with banks about financing for the potential purchase, said the sources.

A 10% stake in the company, known as Taqa, could be worth about Us$4.2bil (Rm17bil) based on its current share price.

If successful, the transaction would be the biggest overseas acquisition by a Chinese company this year, according to data compiled by Bloomberg.

Abu Dhabi has been working with an adviser as it considers selling a 10% holding in Taqa, Bloomberg News reported in April.

Initial non-binding bids were expected to be submitted in May.

Shares in Taqa have fallen about 5% this year, giving the energy company a market value of about Us$42bil (Rm173bil).

While negotiations are ongoing, there’s no certainty that China Southern Power Grid would reach an agreement and another buyer could still emerge, said the sources.

Taqa referred queries to its controlling shareholder, Abu Dhabi sovereign wealth fund ADQ.

A representative for ADQ wasn’t immediately available to comment, while a spokesperson for China Southern Power Grid didn’t immediately respond to a request for comment.

Abu Dhabi, the capital of the United Arab Emirates, has been seeking to attract foreign capital by selling stakes in some of its largest companies.

In recent years, international and local funds have invested more than Us$20bil (Rm82bil) in the operations of state-owned Abu Dhabi National Oil Co.

The Abu Dhabi government has been pushing to turn Taqa, which has a monopoly on power and water distribution in the emirate, into a regional utility champion.

Last year, it orchestrated a plan for Taqa to receive assets from state-owned holding company Abu Dhabi Power Corp, known as Adpower, in return for stock.

Taqa’s plans to cut exposure to oil and natural gas assets and focus on renewables also appeal to international investors.

The company wants to boost the portion of its power produced from solar and wind to 30% over the next decade.

Taqa already owns one of the world’s biggest solar plants in Abu Dhabi and is in the process of building an even larger one.