China's CIC to get $50 billion boost

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BEIJING | Fri Dec 23, 2011 10:00am GMT

BEIJING (Reuters) - China's $410 billion (260 billion pound) sovereign wealth fund China Investment Corp. is set to receive additional funding of up to $50 billion, two sources said, a step that could help it move quickly to buy overseas assets, especially in Europe.

The new funding comes along with an agreement between relevant Chinese government agencies to give CIC new money to manage every year, the sources who had knowledge of the matter told Reuters on Friday.

The sources asked not to be identified due to the sensitivity surrounding China's management of its foreign reserves.

The agreement would lay out a long-term framework under which CIC would be allocated money to manage from China's foreign exchange reserves and would also chart the future of its domestic investment arm, Central Huijin Investment, the sources said.

"The final plan for capital injection will be unveiled shortly and it could be $50 billion," a source close to the matter said.

CIC officials declined to comment.

The cash injection follows in the wake of plans -- reported by Reuters earlier this month -- to create a new $300 billion vehicle that would be affiliated with China's State Administration of Foreign Exchange (SAFE), the part of the central bank in charge of the daily management of China's $3.2 trillion in foreign exchange reserves.

The new funds for CIC, as well as the planned $300 billion venture under SAFE, were earmarked well before the onset of the euro zone debt crisis that has sparked international speculation about possible contributions from China to a bailout effort.

But the funding would give CIC firepower for buys at a time when attractive European and U.S. assets may come up for sale. CIC operates independently of the central bank and said in March that it had fully invested all its cash and would like the government to allocate it more money.

Chinese media have reported since late 2009 that CIC was seeking $100-$200 billion in new funding, but there have been no subsequent reports of progress.

CIC was created in 2007 when China's Ministry of Finance issued 1.55 trillion yuan in special yuan bonds to swap yuan for $200 billion worth of foreign currency from SAFE.

That provided the initial funds for active management in a bid to enhance returns from the world's largest pile of official foreign reserves.

REAL ASSETS WANTED

China's leaders have said recently that they will seek investments in the real economies of the United States and Europe apart from their routine investments in government debt.

Germany's 'manager magazin' reported in an excerpt of an article to be published on Friday, citing company sources, that CIC was the frontrunner to take a 5-10 percent stake in German luxury carmaker Daimler (DAIGn.DE).

The magazine said Daimler's chief financial officer, Bodo Uebber, had hired an investment bank to arrange a potential deal. Daimler's chief executive, Dieter Zetsche, in July said he would welcome additional investors from China, but added he did not think the Chinese would try to take control.

On Thursday, South Africa's Shanduka Group said it had sold a 25 percent stake to CIC, the latest investment by China in Africa's resources sector.

Shanduka has a diversified asset base that includes coal operations and said in a statement CIC had paid 2 billion rand (155 million pounds) for the stake.

CIC acquired its shares primarily from exiting shareholders Old Mutual Private Equity (OML.L) (OMLJ.J) and South African investment bank and asset manager Investec (INLJ.J).

Separately on Thursday, state-owned firm China Three Gorges won the competition to buy Portugal's stake in utility EDP (EDP.LS), paying 2.7 billion euros (2.2 billion pounds), in a privatisation seen key to the indebted euro zone country's ability to sell state assets.

The deal also includes Chinese investment in the wider economy and is the brightest news for Portugal since it was forced to seek a 78 billion euro bailout from the European Union and International Monetary Fund in the spring.

(Reporting by Beijing Newsroom; Editing by Nick Edwards, Matt Driskill, Don Durfee and Muralikumar Anantharaman)

EXCLUSIVE-China's CIC to get $50 billion boost | Reuters

 

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Daimler reportedly seeks CIC investment
Updated: 2011-12-22 07:42
By Lan Lan (China Daily)

BEIJING - The German automotive company Daimler AG is reportedly seeking to sell a 5 to 10 percent stake in itself to the $410 billion sovereign wealth fund China Investment Corp (CIC).

Daimler has hired an investment bank to arrange a potential deal and CIC is considered the front runner, Germany's Manager Magazin quoted Chief Financial Officer Bodo Uebber as saying.

"Our company is not commenting on market speculation," Wang Yan, vice-president of Daimler Northeast Asia Ltd, said in an email on Wednesday.

CIC wasn't available for comment on Wednesday.

Tim Urquhart, a London-based senior analyst with IHS Automotive, said that such a deal would provide more financial support for Daimler's strategy. "They need extra investment to underpin their future (research and development) and production investments," he said.

Mercedes-Benz, the luxury-car division of Daimler, sold more than 1.13 million vehicles in the first 11 months of the year, up 7.3 percent year-on-year and a record, according to the company.

"Daimler's performance is relatively stable. I think its willingness to (sell a stake) to CIC is mainly a government relations strategy, showing its intention to build closer ties with the government," said John Zeng, director of LMC Automotive Asia Pacific Forecasting.

If CIC could buy as much as 10 percent of Daimler, its holding would exceed that of the Abu Dhabi sovereign wealth fund Aabar Investments, which has a 9.04 percent stake in the carmaker.

This proposed deal would be totally different from Geely Automobile Holdings Ltd's acquisition of AB Volvo, said Zeng, adding that CIC would likely be a financial investor without control over company operations.

Dieter Zetsche, chief executive of Daimler, said in July that he would welcome additional investors from China, but added he did not think the Chinese would try to take control.

CIC, the wholly State-owned investment institution, "is driven by purely economic and financial interests", according to its website.

Reuters contributed to this story.

China Daily

Daimler reportedly seeks CIC investment|Business|chinadaily.com.cn

 

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China's CIC takes stake in S.Africa's Shanduka

Thu Dec 22, 2011 7:39am EST

* Shanduka run by political heavyweight

* Investment part of Chinese thrust into Africa (Adds details)

JOHANNESBURG Dec 22 (Reuters) - China's sovereign wealth fund has taken a 25 percent stake in South Africa's unlisted but prominent Shanduka Group, the latest investment by the Asian giant keen to gain greater access to Africa's resources.

Shanduka, whose chairman has close ties to the ruling African National Congress and with a diversified asset base that includes coal operations, said in a statement the China Investment Corporation had paid 2 billion rand ($240 million) for the stake.

Shanduka is an unlisted investment holding company chaired by influential politician-turned-businessman Cyril Ramaphosa.

China is South Africa's biggest trade partner and the ANC has been seeking closer ties with the Beijing to build its economy.

Ramaphosa said the Chinese investment would help his firm branch out in Africa.

"This partnership will allow us to jointly explore future investment opportunities in South Africa and other parts of Africa", Ramaphosa was quoted as saying.

CIC acquired its shares primarily from exiting shareholders, Old Mutual Private Equity and South African investment bank and asset manager Investec.

Standard Bank acted as the exclusive financial advisor to Shanduka and Standard Chartered Bank acted as exclusive financial adviser to CIC on the transaction.

(Reporting by Ed Stoddard; Editing by Jon Herskovitz)

UPDATE 1-China's CIC takes stake in S.Africa's Shanduka | Reuters

 

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Chinese firm to buy 10% of Atlantic's shares
By Louis B Homer
Dec 16, 2011 at 11:58 PM ECT

http://www.trinidadexpress.com/business/Chinese_firm_to_buy_10__of_Atlantic_s_shares-135777038.html

China Investment Corporation (CIC) has signed off on an agreement to purchase ten per cent of the shares of liquefied natural gas producer Atlantic at Point Fortin.

The deal will see the Chinese taking over the shares held by GDF Suez of France.

A mid-term agreement was signed last November, and last week the final signing took place in Port of Spain between representatives of GDF Suez and CIC, the Express learned.

The new acquisition by CIC was part of an exchange investment in Asia in which GDF Suez had relinquished its interest in Atlantic's Train 1. GDF was one of five companies with interest in Train 1.

The transfer of shares is the fourth since the plant was established. The shares were first held by Cabot, then Tractabel and GDF Suez, a French company with investments in electricity generation and natural gas as well as renewable energy.

Atlantic supplies gas to the United States and other countries and has four trains producing some 100,000 cubic metres of liquefied natural gas per day.

 

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China's Guohua Blows Away Rivals To Tassie Wind Farms
December 22, 2011, 11:02 AM EDT
By David Winning

China's Guohua Energy Investment Co. has agreed to buy 75% stakes in two of Australia's biggest wind farms for A$88.6 million, placing a bet on the country's renewable energy sector just weeks after controversial carbon tax legislation was passed by parliament.

Guohua, a unit of China's state-owned coal giant Shenhua Group, is acquiring interests in the 65-megawatt Bluff Point and 75-megawatt Studland Bay wind farms in northwest Tasmania state from renewable energy producer Hydro Tasmania.

Australia has up to now been a laggard in using renewable energy use compared to other developed countries, such as Spain and Germany, as investors struggled to turn a profit on early projects that were competing for customers with generators of electricity produced from burning cheaply available thermal coal.

At the end of the 2008-2009 financial year, the last complete data available from the Australian government, renewable energy accounted for around 7% of total electricity generation in the country. Of this, wind energy contributed 1.5% to total power output.

However, this is set to increase sharply as Australia's government has set a target of having 20% of electricity supply coming from renewable energy sources like wind power by 2020. To achieve this goal, it has introduced policies that mandate electricity retailers to buy a proportion of their sales from renewable energy sources.

At the same time, Australia is also preparing to impose a tax on some of the country's biggest coal producers and users in an effort to cut pollution. The levy will be charged at a fixed price of 23 Australian dollars (US$23.50) per carbon ton from the country's top 500 polluters starting July 2012.

In a statement Thursday, Hydro Tasmania said the deal with Guohua values the two wind farms at Woolnorth at A$282 million. The company will retain the remaining 25% interests in both projects.

Hydro Tasmania expects the transaction to reach financial close in February, and Guohua will then be able to hold exclusive talks over six months on an equity investment in the A$400 million, 168-megawatt Musselroe wind farm that began construction this month.

Hydro has been looking for a new partner for the two wind farms–known collectively as Woolnorth–since September, following the break up a previous joint venture with CLP Holdings, Hong Kong's largest utility by capacity.

Following the break-up, CLP's TRUenergy unit took over the operating Waterloo wind farm in South Australia state, and assumed the interest that Roaring 40s held in the Cathedral Rocks wind farm.

Hydro Tasmania took ownership of the Studland Bay and Bluff Point wind farms, as well as some assets under development, including Musselroe.

It subsequently appointed Australia & New Zealand Banking Group to advise on the sale of part of its interests in the two operating projects.

In addition to investors in producing wind farms and new developments, Australia's wind energy sector is also attracting Chinese makers of turbines.

Xinjiang Goldwind Science & Technology Co., one of China's big renewable energy national champions, already has an office in Australia led by a former Hydro Tasmania executive. Earlier this month, it signed agreements with Powercor Australia to connect 13 of its 1.5-megawatt class turbines in Victoria state to the Australian grid.

 

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Seeking to Circumvent Possible U.S. Trade Sanctions, China Buys Hawaiian Solar Company
Written by John Daly
Saturday, 24 December 2011 02:45

Chinese investment in the U.S. economy up to now has been primarily in the form of U.S. Treasury bills.

But, reading the U.S. press and conservative calls for punitive trade tariffs against China, Beijing's investors have taken a leaf out of Tokyo's 40 year-old playbook, when similar concerns were raised about Japanese imports. Four decades ago Japan cannily began not only to establish factories in the U.S. for its major U.S. exports, primarily automobiles, but began a cautious policy of investing in struggling U.S. companies, so if and when Congress got more xenophobic Japanese manufacturers could point out that trade barriers would harm American workers as well as Japanese ones.

The net result on punishing Japan with restrictive tariffs quickly became the daunting possibility of throwing U.S. workers into unemployment, then, as now, the third rail of American politics, and what Congressman want to be seen as increasing unemployment?

The above scenario is behind the recent acquisition by Tianwei New Energy Holdings Co., Ltd. (Tianwei) of Hawaii's troubled Hoku Corporation, a solar energy product company, a leading provider of silicon wafers, photovoltaic (PV) cells, modules and systems.

Last month Tainwei announced the signing of a definitive reseller agreement establishing Tianwei Solar USA, Inc., a wholly-owned subsidiary of, as the primary distributor of Tianwei New Energy's PV modules to the North American market.

On 1 December Tianwei started its polysilicon production via Hoku Corp. with an annual capacity of 2,500 tons. Last year China's National Development and Reform Commission approved Tianwei purchasing 60 percent of Hoku Corp.'s outstanding shares.

According to Hoku Corp., "During the three months ended September 30, 2011 Hoku Materials incurred an operating loss of $7.6 million," as even as of "September 30, 2011, Hoku Materials has capitalized $575.6 million related to construction costs for the Polysilicon Plant and had received $140 million in customer deposits as prepayments under long-term polysilicon supply agreements."

Can you say cash flow problems?

Under the terms of the agreement, Hoku's newly formed subsidiary will market, distribute and sell Tianwei New Energy's full range of UL-listed PV modules in North America. Hoku established offices in Southern California for Tianwei Solar USA, Inc and will initially focus on developing key sales channels within the commercial and residential segments of the distributed generation solar market. Tianwei New Energy already has an established customer base in Europe, in 2010 delivering more than 200 megawatts of PV modules.

Spinning the news, Hoku Corp. CEO Scott Paul said, "We are extremely pleased to continue strengthening our relationship with Tianwei. This new PV products division represents the first of several steps forward in our continued expansion of Hoku's global market presence. It will provide a strong complement to our existing solar projects business, and we look forward to supplying Tianwei New Energy's modules to project developers, PV integrators and utility customers throughout North America."

Reciprocating the back rub, Tianwei general manager and now Hoku Corp. director Zhengfei Gao purred, "We recognize Hoku Solar's PV integration expertise, brand strength and market presence in the U.S. North America is an important, growing market in the solar industry, and Tianwei is very pleased to have Hoku leadership in our strategic North American expansion."

So, what has China bought?

Hoku Corp. consists of three business units: Hoku Materials, Hoku Solar, and Tianwei Solar USA, Inc., manufacturing polysilicon for the solar market from its plant currently under construction in Pocatello, Idaho and now Hoku Solar markets and sells PV modules manufactured by Tianwei New Energy.

And the future looks sunny. Tianwei chairman Ding Qiang said that Tianwei signed a distribution agreement with Hoku Corp. to be its distributor for its sales of modules not only in the U.S., but Canada and South American regions as well.

And Tainwei is already garnering allies. On 21 December, according to Ding, the U.S.-based Coalition for Affordable Solar Energy wrote to Hoku competitor solar-panel maker SolarWorld asking it withdraw its petition asking the American government to impose heavy tariffs on Chinese solar energy products for unfair trading practices, commenting, "By asking government to interfere and artificially increase the price will only hinder the deployment, cost thousands of jobs, reduce our energy security, and further negatively impact an already shaky economy."

Two months ago SolarWorld Industries America, an Oregon company, and six other undisclosed partners filed an appeal to the U.S. Department of Commerce (DOC) alleging unfair Chinese business practices and the DOC replied in November that it would conduct an investigation to determine whether Chinese firms have been selling solar panels in the United States at unfair discounts and receiving illegal government subsidies and a ruling earlier this month by the International Trade Commission concluded that U.S. solar companies were being harmed by Chinese solar imports.

Interestingly, SolarWorld Industries America, the largest U.S. solar manufacturer, is now owned by a German company
Many energy analysts have commented that acquisitions of American companies provide a way for Chinese solar energy companies to avoid U.S. trade barriers.

Well, duh!

The question remains – where were U.S. investors when Hoku Corp. was struggling?

 

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China Petrochemical Corp. Completes Purchase of Daylight Energy
December 23, 2011, 8:54 PM EST
By Benjamin Haas

Dec. 24 (Bloomberg) -- China Petrochemical Corp., the nation's biggest oil refiner, completed the purchase of Canada's Daylight Energy Ltd. for about C$2.2 billion ($2.16 billion), the company said in an e-mailed statement yesterday.

Sinopec, as the Chinese company is known, said it paid C$10.08 a share in cash for Calgary-based Daylight.

Cong Peixin, a spokesman for the China Petrochemical unit that carried out the transaction, declined to elaborate on the statement. Daylight confirmed the completed sale in a statement released yesterday.

The purchase gives the Beijing-based company access to more than 300,000 acres of land in areas rich with oil and natural gas, after falling crude prices made valuations attractive.

Sinopec Group, China National Petroleum Corp. and Cnooc Ltd. are seeking to gain technology through partnerships in order to develop China's shale-gas reserves, estimated to be larger than those in the U.S.

China, the world's biggest energy consumer, has partnered with Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp. to explore possible shale wells.

Chinese companies have announced $18.3 billion worth of bids this year for overseas oil and gas exploration and production companies, according to data compiled by Bloomberg. Cnooc bought Canada's Opti Canada Inc. in November for $34 million in cash, agreeing to take on $2.4 billion in debt.

Daylight's proven and probable reserves rose 46 percent to the equivalent of 174 million barrels of oil at the end of 2010, the company said March 1. The company's production was 35 million barrels in the third quarter, according to data compiled by Bloomberg.

China Petrochemical Corp. Completes Purchase of Daylight Energy - Businessweek