China State Grid’s 50Hertz deal scuppered as Elia pays up €976m

Australian fund manager IFM Investors has sold down half of its 40 percent share in Eurogrid International, the holding company of the German regional transmission system operator 50Hertz, to Belgian operator Elia for €976.5 million, putting an end to interest from China State Grid.

Elia now owns 80 percent of 50Hertz, one of Germany’s four power transmission system operators of an area of about 10,000 kilometres. Elia and IFM had teamed up in 2010 to pay Vattenfall an enterprise value of about €800 million, with a 60:40 equity split. Elia has an option to buy the remaining 20 percent in future.

The Belgian operator last month revealed IFM and China State Grid were in negotiations for a possible deal, in which the Chinese group would have taken a 20 percent stake in 50Hertz. The bid prompted questions about whether the German government should take action, after it last year beefed up options on scrutinising bids on critical infrastructure from groups outside the European Union. However, these regulations only extended to offers of at least 25 percent.

A German government spokeswoman confirmed last month that discussions had been held regarding the deal but rejected suggestions it was looking for an alternative buyer, adding that “there is rarely anything in legislation that relates specifically to a country”.

“We appreciate that our majority shareholder Elia has decided to use their pre-emption right,” said Boris Schucht, chief executive of 50Hertz. “This is a strong signal to bring the energy transition forward in Germany, as well as in Europe. Elia and IFM Investors are furthermore engaging to realise the ambitious investment programme to make the energy transition happen, like they have in the previous eight years with their constructive support.”

According to the statement, Elia has confirmed its commitment to invest €2.3 billion and €3.3 billion in Belgium’s and Germany’s grid infrastructure respectively, over the next five years.

50Hertz increased its turnover last year to €9.9 billion, up from €9.5 billion in 2016, it revealed last week. The company represents the fastest-growing part of the Elia Group. This growth is mainly driven by high investments in grid infrastructure to achieve the German Energiewende, which is leading the country to generate a very significant amount of green energy, according to the statement.