French power and gas company GDF Suez wants its new alliance with China's sovereign wealth fund to bring in Chinese partners to help develop global energy projects and expand its Asian presence, the company's chairman said Monday.
China Investment Corp. agreed in August to invest 3.3 billion euros ($4 billion) in GDF Suez's gas exploration unit and a gas facility in the Caribbean. The companies pledged to look for more joint investment opportunities in the Asia-Pacific region.
The deal, the first of its kind for CIC, reflects a growing trend for Chinese investors to expand abroad by taking minority stakes in established companies. The Chinese investors gain access to experience and technology while reducing the risk of political friction by limiting their ownership. The Western partners get increased access to China's fast-growing market and its pool of investment capital.
Paris-based GDF Suez wants the partnership to help drive its expansion in Asia's fast-growing energy markets, said company chairman and CEO Gerard Mestrallet. The company is developing gas fields in Australia and Indonesia, and Mestrallet said it wants to expand in gas supply, water treatment and other utility businesses in China.
"CIC can give better access to some Chinese financial partners," Mestrallet said at a news conference.
"It can also open doors for us with a large variety of Chinese potential partners" in power generation and other businesses, he said. "And CIC could help GDF Suez to find Chinese partners to participate jointly in projects in Southeast Asia and Africa, or eventually in Latin America."
CIC was created in 2007 to invest a portion of Beijing's $3.2 trillion in foreign reserves. Its leaders have said their investments abroad will be mostly small shareholdings in companies and other minority investments to reduce the risk of arousing political tensions.
CIC agreed in August to invest 2.3 billion euros ($3.2 billion) in GDF Suez's gas exploration unit in exchange for a 30 percent stake and to pay 1 billion euros ($1.4 billion) for 10 percent of the LNG Atlantic liquefaction plant in Trinidad and Tobago.
GDF Suez is one of the world's biggest gas and power companies, with 85 billion euros ($119 billion) in revenue last year. Its activities include gas production and supply, power generation and water treatment in Europe, Asia and the Americas.
In China, GDF Suez supplies gas to power companies and has 26 joint ventures to treat or distribute water, including in the major cities of Chongqing and Shanghai.
Mestrallet was in Beijing to sign the final agreement on CIC's investment. He said the two sides are creating a joint board to look for more investment opportunities.
He said CIC already has helped to arrange a possible line of credit for GDF Suez from China's biggest state-owned commercial lender, Industrial & Commercial Bank of China Ltd.
Also in China, GDF Suez has an agreement with state-owned energy company CNOOC Ltd. to cooperate on developing new projects.
The French company is providing CNOOC with a ship that can store and regasify liquefied natural gas to supply coastal areas that lack gas terminals. GDF Suez's executive vice president, Jean-Marie Dauger, said the gas vessel is valued at about $250 million but declined to give other financial details.
Other Western companies also are forging links with Chinese partners to expand access to the world's second-largest economy and investment, including cash-rich state banks that avoided the credit problems that battered Western institutions.
General Motors Co. announced a venture in 2009 to expand in India with China's Shanghai Automotive Industries Corp., which committed to invest $350 million. The companies said they might also team up to sell vehicles in Southeast Asia.
In June, Chinese conglomerate Fosun acquired 7.1 percent of French resort operator Club Med. The deal gives Club Med an experienced Chinese partner as it expands in China's booming tourism market.
GDF Suez also might look for Chinese partners to invest in power generation projects in other countries, Mastrallet said. He said there are no plans to get involved in generation in China, where government regulations do not permit independent power companies.
GDF Suez: http://www.gdfsuez.com
China Investment Corp.: http://www.china-inv.cn
CNOOC Ltd: http://www.cnooc.com.cn