China Southern Weighing Bid for $3 Billion Enel Peru Assets, Sources Say

(Bloomberg) -- China Southern Power Grid Co. is considering a binding bid for Enel SpA’s distribution operations in Peru, according to people familiar with the matter, in what could be one of the largest cross-border deals by a Chinese buyer this year.

The Guangzhou-based state power firm is working with a financial adviser after entering into a second round of bidding and conducting due diligence, the people said, asking not to be identified because the matter is private. Enel’s Peruvian distribution assets, which could be valued at about $3 billion, have drawn interest from other firms in the industry as well as infrastructure funds, the people said.

Separately, the generation assets could fetch about a $2.5 billion valuation in an acquisition, the people said. China Southern is not in the running for that business, they said.

Shares in Enel were trading 1% higher at 10:09 a.m. in Milan on Friday, giving the company a market value of €54 billion ($57 billion). Italy’s biggest utility said in November it plans to sell assets worth as much as €21 billion to cut its record debt pile, exiting markets in South America and Europe.

Considerations are ongoing and there’s no certainty China Southern Power will proceed with an offer, the people said. Representatives for China Southern Power and Enel declined to comment.

Enel’s generation and distribution operations in Peru have more than 1.5 million customers, according to the company’s website. Enel Distribucion Peru provides electricity to the northern area of metropolitan Lima, the constitutional province of Callao and the provinces of Huaura, Huaral, Barranca and Oyon. It distributed 8,441 gigawatt hours in 2021, according to a press release. 

Acquiring Enel’s distribution assets in Peru would help boost China Southern Power’s presence in Latin America after it bought a 28% stake in Chilean utility Transelec SA from Brookfield Infrastructure Partners for about $1.3 billion in 2018.

The pace of China’s offshore purchases has declined in recent years after the high-profile implosions of serial acquirers HNA Group Co. and Anbang Insurance Group Co., as well as governments including the European Union and India tightening rules around inbound deals during the Covid pandemic. The volume of such transactions fell to about $13.5 billion last year, the lowest since 2007, according to data compiled by Bloomberg.

Latin America has in recent years turned into a key region for Chinese companies seeking to expand overseas amid heightened scrutiny in Europe and the US. Other active players that have grown via acquisitions in the region include State Grid Corp. of China and China Three Gorges Corp.

--With assistance from and .

(Updates with shares in fourth paragraph.)

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