Most Chinese companies making large acquisitions in Asia and the west do so in the expectation that they will gain new management and technological expertise as much as the target companies themselves.
The State Grid’s successful $3.95bn (€2.7bn, £2bn) tender for the Philippines’ power grid turns such notions on their head.
The State Grid, the government-owned holding company for a sprawling network of provincial and regional transmission companies in China, is the largest power company in the world, with 1.5m employees. It controls just over 80 per cent of China’s power transmission assets, with most of the rest in the hands of China Southern Grid.
The State Grid has presided over what has probably been the largest expansion in a power system in history, with new capacity equal to the entire installed grid of the UK added for three years in succession.
State Grid companies have already ventured overseas, and offer engineering services in about 40 countries, says Sun Jinping, the head of the company’s international co-operation division.
But the Philippines deal, which still faces extensive scrutiny in the volatile national congress, dwarfs any of its previous overseas ventures. State Grid headed a consortium with two local partners to develop and operate the grid for 25 years.
Mr Sun says the huge expansion of the Chinese power market has given the company the skills to take on the Philippines, which has both expensive electricity and frequent blackouts.
“We have experienced power shortages [as has the Philippines], but we have proven technology which can be used for upgrading the network,” he said.
“This is very valuable in a market like the Philippines. They are now experiencing very fast demand. They need this kind of experience.”
Mr Sun says the State Grid’s skills in “real-time monitoring” of the grid would be especially valuable in helping prevent blackouts in the Philippines.
Manop Sangiambut, a power analyst with the CLSA, the brokerage, in Shanghai, said State Grid’s published figures on power lost in transmission were relatively low.
“For medium to high voltage technology, they have more or less developed their own technology,” he said.
The State Grid, however, will need a new set of skills to navigate through the Philippino political process, which has put Chinese companies under scrutiny.
Gloria Macapagal Arroyo, the Philippines president, recently scrapped Chinese state group ZTE Corp’s $330m contract to build a national broadband network after her economic planning chief admitted being offered a bribe of 200m pesos by the top Philippine election official to approve the deal.
