After knowing the agreement of the sale of Enel assets in Peru to the enterprise China Southern Power Grid International (CSGI) for USD 2,900 million, has generated a discussion that the electricity distribution market in Metropolitan Lima it could remain in the hands of a single economic group with Asian capital.
Although the operation must receive the go-ahead and approval of the free competition authority, Indecopi, Erick Valderrama, partner of the corporate and investment area of Estudio Miguel Mur Abogadosindicated to infobaethat this movement has different edges, both for the market and for legal issues in the country.
“A first aspect to consider is the corporate and corporate issue of control of the operation. just the National Society of Industries (SNI)one of the points that it has raised, is that, from these acquisitions, electrical energy, which is an essential good for the Peruvian State, will remain in the control of a company whose final ownership is the Chinese Government”, he noted. the expert in corporate law, mergers and acquisitions.
It should be noted that, in the south of the capital of Peru, the market is taken over by the Chinese company Yangtze Power International (CYPI)a firm controlled by China Three Georges Corporation which also owns the Chaglla hydroelectric plant, which it bought from the Brazilian Odebrecht in 2020. And if the acquisition of Enel’s assets by CSGI, this company would control the electrical power of the north of Lima.
Another effect that this operation could generate, Valderrama explained that indecopi It will have to analyze whether, as a consequence of the acquisition of 100% of the shares that the Chinese company is carrying out, it will generate an alleged distortion within the market or if it will affect consumers or industry players at the distribution level. transmission or generation.
According to Erick Valderrama, one of the important aspects that he is going to consider indecopi to give the go-ahead to the operation is the determination of free competition or whether it will affect the energy market in the capital.
“This is something that has been done before with the acquisition of light of the sur, indecopi authorized the acquisition, but conditioned it to the fulfillment of some objectives and that they have supervision by the regulatory entity. So I would think that it would go that way as well, which somehow makes it possible to ensure that Indecopi is going to verify in practice that the operation does not generate any distortion within the market”, explained the specialist.
The present day indecopi has mentioned through its social networks that it has not received any type of request for approval, review or authorization of the operation to purchase the assets of Enel in Peru.
However, the Estudio specialist Miguel Mur Abogados indicated once Indecopi receives the request for the operation, the entity has a period of 30 days to review it, and after that, issue a report in a resolution, where they will indicate yes or no they approve the purchase.
“If they approve it without any type of observation or condition, the operation passes and concludes with the purchase of the shares through a takeover bid (OPA)with that the operation is concluded and the shares are transferred and control is completely ceded to the Chinese company”, commented the expert.
Another option is that Indecopi can obtain an approval with verification conditions, with compliance conditions or guarantees by the Chinese company. After that, the company will have to justify and demonstrate that it can comply with said conditions and the final approval of the acquisition is given.
Likewise, Valderrama said that, in this type of operation, the acquisition of shares will be conditional on the approval of the authorities and regulators of each country.
The expert in mergers and acquisitions commented that a social effect that this movement could generate for the Peruvian consumer is how they will see the generation of a certain concentration in the electricity market by a single economic group. “This is going to generate concern because all the electricity in Lima, where the largest number of businesses are generated, is going to be in the hands of a single economic group,” said Valderrama.
About how it would affect the final consumerthe specialist pointed out that he will not see an immediate affectation with this type of operation, which is why it could be seen over time.
If there is an increase in the cost of the electric powerthe final consumer is going to question whether this increase really responds to a market need or is it as a consequence of abuse of a dominant position”, said Valderrama.
For his part, Renato Lazo Bezold, specialist in Gas and Fuelssaid to infobae that the current law that establishes the prior control of business concentration operations, which was promulgated in 2021 in the country, is insufficient to ensure the interests of Peruvian consumers.
“What happens is that the mergers and antimonopoly law was elaborated anticipating typical cases, such as, for example, the purchase of a private company from another company with which it reaches 100% control of that market or that it has a dominant position in the market with the purchase of another company that was previously its competition; but in this case, the sale of Enel is something that is not foreseen, since the regulations do not take care of cases in which the economic value goes hand in hand with the geopolitical interests of certain companies, as is the case with this operation” argued Lazo Bezold.
Following the announcement of the signing of a purchase-sale contract between CSGI and the Enel group for its participation in Peru, the National Society of Industries (SNI) expressed concern about a situation that would represent a concentration in the distribution of electrical energy in Lima.
In this sense, the business union warns that Chinese companies would have 100% of the electricity distribution market in Lima. “This acquisition, according to Peruvian law, is subject to the approval of the indecopi, which must analyze all the edges that implies that two companies owned by the same foreign state concentrate the operation of such an important service for domestic and industrial consumers such as electricity distribution, in one of the strategic spaces with the greatest importance for the economic development of the country. It is not about the generation of a ‘monopoly’ in private hands, but about the ‘creation of a monopoly’ in the ownership of the distribution of electrical energy in the hands of a foreign power”.
The SNI recalled that, in 2020, Luz del Sur was sold to the China Three Gorges Corporation group, a Chinese state-owned company, and now in 2023, the China Southern Power Grid company, also a Chinese state-owned company based in Guangzhou, has signed a purchase-sale contract with Enel that, if approved, would lead to a concentration of 100% of the electricity distribution market in Lima in the hands of the People’s Republic of China”, indicated the business union.
Also, the business association calls on the Peruvian State, beyond technical considerations, to have sufficient vision to understand and, consequently, act in a situation that could expose consumers to paying excessive prices for electricity, as a consequence of the absence of competition.
“The concentration of ownership in a given market should be a matter of concern for every citizen. Even more so if it is a non-tradable strategic asset, in the most concentrated demographic space in the country and with the highest incidence due to the economic activities that it brings together, such as electricity distribution in Lima”, said the SNI.
The National Directorate for Investigation and Promotion of Free Competition (DLC) of Indecopiinforms that, to date, it has not received a request for authorization regarding the acquisition of Enel Distribución Perú SAA and Enel X Perú SAC, by China Southern Power Grid International (HK) Co., to which the ” Fact of Importance” reported to the Superintendency of Stock Market (SMV).
In the absence of such a request by the companies involved, it is not possible for the institution to provide information in this regard.
“It is important to remember that within the framework of the ‘Law that establishes prior control of business concentration operations’, once the request is received, Indecopi will evaluate it within the terms established by law, following technical and objective criteria and safeguarding efficiency. economy in the markets for the well-being of consumers”, indicated the entity.
Since the entry into force of the Law, in June 2021, Indecopi has received 27 business concentration requests. 22 of them were approved without conditions, one application was authorized with conditions due to the risks warned of the competition, one application was withdrawn by the applicant and the other three are in process.
