Companies from Brazil and China compete for privatisation of the year in Portugal

5 February 2014

Brazilian groups Odebrecht and Solvi and Chinese groups Beijing Enterprises Water and Sound Global are competing for what is considered to be the biggest privatisation in Portugal in 2014, of waste management company Empresa Geral de Fomento (EGF).

The preliminary assessment of Empresa Geral de Fomento by Roland Berger, according to Portuguese financial daily Diário Económico, points to a figure of between 140 million and 240 million euros, but the government gave no guideline figure in its public tender, which is expected to be concluded in June.

Proposals to buy EGF, which controls the solid waste management companies of public water group Águas de Portugal, will be assessed based on eight criteria including price, quality of the strategic project, knowledge and technical skills of the candidates.

Diário Económico also said that the two Chinese groups were in touch with a view to joining forces to make a joint proposal.

As well as Odebrecht, a Brazilian company with a strong presence in Angola and Mozambique, Brazilian company Solvi is also in the race along with a Portuguese consortium made up of Mota-Engil, DST and Teixeira Duarte.

EGF is made up of 11 multi-municipal solid waste systems, each with an average local authority stake of 49 percent.

This privatisation is also of significant interest to law firms, consultancies and investment banks, as the main players are all competing to advise the various consortiums.

Due to a financial crisis and a bail-out package provided by the European Union and the International Monetary Fund (IMF), Portugal has been selling off some of its main state-owned companies and stakes in the country’s key companies.

Privatisations in 2014 are expected to bring in revenues of 500 million euros, by selling EGF, selling the majority of postal company CTT and the remaining state capital in power grid company REN, whose main shareholder is already China State Grid following the privatisation process in 2012.

Another privatisation that has been long-awaited but which remains uncertain is the sale of TAP – Air Portugal, which failed to go ahead at the end of 2012 due to a lack of financial guarantees for the only offer put forward. According to the Portuguese press there are now several new parties interested in buying TAP.

Chinese investors were awarded the most recent privatisation, of insurance company Caixa Seguros, which will now be controlled by Fosun International Limited.

Caixa Seguros is part of Portugal’s biggest financial group, state-owned Caixa Geral de Depósitos (CGD), and the Portuguese government made the decision to sell around 80 percent of its insurance business for 1 billion euros.

According to the Portuguese government the Chinese group, which out-bid US company Apollo Management International, has strong ties to the insurance sector, as well as its expansion plan based on available funds of 1.5 billion euros in cash.

Fosun now plans to expand the company’s activities to Asian and African markets.

The acquisition of the insurance group by Fosun is the latest in a string of Chinese investments in Portugal in the last few years, the most notable of which were China Three Gorges buying a stake in EDP – Energias de Portugal and China State Grid buying a stake in power grid Redes Energéticas Nacionais (REN). (macauhub)