Berlin takes stake in power firm eyed by Chinese investors

50Hertz is one of four transmission system operators in Germany and ensures that 18 million people are supplied with electricity.
50Hertz is one of four transmission system operators in Germany and ensures that 18 million people are supplied with electricity.PHOTO: REUTERS

It cites national security reasons as China firms' spending spree sparks German fears

BERLIN • The German government said yesterday it took a minority stake in electricity transmission firm 50Hertz for "national security" reasons, thwarting Chinese investors from buying into the strategic company.

"On national security grounds, the federal government has a major interest in protecting critical energy infrastructure," the Finance and Economy ministries said in a joint statement.

Berlin has therefore tasked a public bank with purchasing a 20 per cent stake put up for sale by Australian infrastructure fund IFM and which has been sought by China's State Grid.

The unusual step comes as Germany views China's huge interest warily, following a string of high-profile investments by the Asian giant in sectors ranging from robotics to automobiles to finance.

The Chinese group had already tried to take a minority stake in 50Hertz earlier this year.

But their first attempt was blocked as 50Hertz's majority shareholder - Belgian power transmission system operator Elia - snapped up the stake and expanded its holdings to 80 per cent.

As part of a spending spree across Europe, Chinese companies have bagged airports, harbours and engineering firms.

Germany, with its high-tech firms, has been a prime target.

Earlier this year, Geely's billionaire boss Li Shufu shocked the country's coveted auto sector when he took almost 10 per cent in Daimler, which owns the Mercedes brand.

A study by consultancy EY found that Chinese companies bought 54 German firms last year and invested US$13.7 billion (S$18.7 billion) in Europe's largest economy.

Underlining German concerns over the spate of Chinese acquisitions, domestic intelligence chief Hans-Georg Maassen had said in May that "one won't need to spy if one simply buys up entire companies".

But Beijing has insisted that it has no ulterior motives.

During a visit to Germany this month, Prime Minister Li Keqiang urged Berlin to grant Chinese companies the access that German firms enjoy in China.

"Our investments do not threaten your national security. Through joint projects, we want to learn from your experiences and technologies," he said.

Not only Germany, but the European Union as a bloc, has been watching the Chinese advances anxiously.

German Chancellor Angela Merkel has also raised concerns over China's heavy investments in the western Balkans as part of Beijing's plans for a modern-day Silk Road.

Current legislation in Germany allows the government to block an investment from a non-EU country only if the investor wants to take 25 per cent or more.

Berlin last year toughened rules for foreign takeovers, by extending the range of companies eligible for a probe under "critical infrastructure" provisions or considered to be developing "key technologies".

In the case of 50Hertz, the government was unable to block the purchase outright as the stake concerned fell below the 25 per cent threshold.

It has therefore deployed the rare tactic of simply buying the stake.

But Berlin said the measure would be "temporary" and that it intended to sell off the shares again in the future.

Welcoming the government's move, 50Hertz said it showed "how fundamentally important the transmission network is as part of the critical infrastructure of our country". The company is one of four transmission system operators in Germany and ensures that 18 million people are supplied with electricity.


A version of this article appeared in the print edition of The Straits Times on July 28, 2018, with the headline 'Berlin takes stake in power firm eyed by Chinese investors'. Print Edition | Subscribe