Chinese state energy giant buys stake in EDP

The Portuguese government insists that the deal it has struck with the Chinese state-run power company Three Gorges is ?good for the company and good for Portugal?.

Dismissing claims from left-wing parties that it has ?sold off the family silver? to a country which rides roughshod over democratic freedoms and human rights, the PSD government said the Chinese sale would ?bring benefits to the economy?.

The Chinese energy giant outbid the German company E.ON, which admitted it could not make a better offer, and a bid from the Brazilian firm Eletrobras.

The Portuguese treasury secretary, Maria Luisa Albuquerque, said that the 21% privatisation deal of the formerly state-owned stake in Energias de Portugal was key to showing the markets and IMF that it meant business when

it came to slashing its public costs.

The Government said the deal was good for Portugal because it meant Chinese investment in other sectors of the economy would write down EDP?s debts, and provide Chinese investment in Portuguese renewable energy projects.

The treasury secretary added that total investment in EDP and the Portuguese economy through offsets and spinoffs could reach eight billion euros when taking into account financing from Chinese banks.

?This commitment is a vote of confidence in Portugal?s economy and in one of its biggest companies? the minister said in a press conference to announce the winning bid.

The Portuguese State holding company Parpublica, which held and managed the Government?s Golden Share in what is the country?s largest company, said that premiums on share prices had rocketed 53% after the deal was stuck.

Share prices closed 3.74% higher at ?2.33 per share, well ahead of the average 1% gains achieved from other companies on the Lisbon stock market at the time of the sale.

The Government is also selling its stake in the state-controlled power grid company REN, plans to sell state airline TAP and airport management company ANA as well as part of the national television and radio broadcaster RTP.

Between this year and 2014 the Government is to undertake the largest public sell-off in the country?s modern history, expecting to rake in ?5.5 billion in receipts ? almost the same as it made by transferring bank pension funds to the public sector in 2011 (?6 billion).

However, unlike the transfer of pensions to social security, the Government is not allowed to directly use the sums made from selling off state stakes in companies to pay off its debts.

For example, when the Government sold off its remaining 21% share in EDP, the cash, because it is a public equity, cannot be included in State Budget receipts to directly reduce the deficit.

Privatisation can only affect the deficit indirectly; for example, when the State sells off a public company, it can, by law, use around 40% of the netted value in reducing public costs which in turn reduces its financial responsibilities and obligations, making State financing cheaper and interest rates lower.

Privatisation does, however, bring other indirect benefits. The business is likely to be run more efficiently in private hands, which in turn will contribute towards an improved economy and, in the long term, improve the State?s solvency and tax receipts.

Source: http://c.moreover.com/click/here.pl?r5719670194

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