Is China Three Gorges' US$10.8b bid for Portugal's EDP Renovaveis falling apart?

Stiff US regulations are a key threat.

Yet another roadblock is threatening China Three Gorges Corporation’s long-planned acquisition of EDP Renovaveis, Portugal’s largest company.

EDP fears that CTG’s proposed takeover will fail to secure the approval of the Committee on Foreign Investment in the United States (CFIUS) and the Federal Energy Regulatory Commission (FERC). EDP has a portfolio of 5,055 MW in the United States, including both onshore wind (4,965 MW) and solar power plants (90 MW).

“EDP Renováveis’ Board of Directors recognises that the time required to obtain such regulatory and market clearance may be considerable, and since the relevant authorities have powers to impose remedies and mitigations measures, such proceedings may have implications in the Offer. This may be most relevant in the United States, where remedies and/or mitigation measures may be imposed by CFIUS and/or FERC,” the company said in a statement.

As a result, reports revealed that CTG is looking for a purchaser for EDP’s US assets.

Apart from US regulatory roadblocks, CTG also has to contend with fierce competition from other energy companies, including France’s Engie SA.

Early in June, EDP’s Board of Directors snubbed CTG (Europe)’s offer of €7.33 per share, noting that the offer represents a significant discount to EDP’s current value and price targets.

“The Offer does not reflect an improved market environment and the better prospects in EDP Renováveis’ main markets. The consideration of the Offer (€7.33 per share) represents a discount of 6.6%, rather than a premium, versus the closing share price prior to the Preliminary Announcement (€7.85); a discount of 6.5% to equity research analysts’ price targets; a discount to comparable trading multiples of listed companies; and a discount to comparable renewable takeover offers in Europe for minority stakes,” EDP said in a lengthy statement.