Tuesday, August 9, 2011

CIC acquires 30% stake in GDF’s E&P unit for $3.3 billion. Chinese companies on acquisition spree again.

China Investment Cop (CIC) has inked Memorandum of Understanding to acquire a 30% stake in GDF Suez's gas exploration and production unit. It is believed that CIC will acquire the stake for as much as €2.3 billion ($3.27 billion) and finance GDF to expand power projects in Asia-Pacific.

Facts of GDF
GDF deploys its exploration and production activities in the Netherlands, Germany, the United Kingdom, Norway, Algeria, Egypt, and, in a more limited way, in Mauritania, the Ivory Coast, the USA, Indonesia, Denmark and France. The Group is also present in Azerbaijan, Libya, Australia and Greenland. The key figures concerning the exploration-production sector are as follows:
  • 51.2 MMBOE (Gas- 74% and Oil- 26%) produced in 2010
  • 815 MMBOE (Gas- 74% and Oil- 26%) in 2P reserves at year end 2010.


Source: GDF SUEZ

Comments on this Chinese Alliance
  • There are some uncertainties about this MoU getting finalised. On the other hand if it is finalised, it will be beneficial to GDF to reduce its liabilities by 10 billion to 4 - 5 billion, and to meet the rapidly growing power demand in Asia-Pacific.
  • GDF Suez has plans to put the exploration and production business into a separate unit ahead of the capital increase by the end of the year. As part of this, are there any chances for other potential candidates to acquire a strategic stake in GDF following the dilution of 30% stake?
  • In 2009, China Investment made significant investments in Russia (Nobel Holdings) and Kazakhstan (KazMunaiGas EP). Last year, CIC formed an oilsands JV with Penn West Energy and committed to invest approximately $800 million in Penn West’s assets. Now, CIC has taken an initiative to venture into Europe. CIC- Quite active in overseas investment and posted 11.7% return on its overseas investments last year.
  • Since January 2011, when CNOOC struck a Niobrara JV, there were no acquisitions by the Chinese companies. This $4.28 billion alliance and the recent CNOOC-OPTI oilsands (~$2.1 billion) deal have ended the long break the Chinese companies had taken from acquisition mode. Looks like the acquisition spree has again started!

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