COLUMN | Strategic National Assets

El Mercurio de Valparaíso, October 20, 2019

Richard Kouyoumdjian
Vice President, AthenaLab

On October 14, Sempra Energy announced the sale of Chilquinta and its affiliates to State Grid International Development Limited, a subsidiary of the Chinese state-owned enterprise State Grid Corporation of China. Previously, in March 2018, the also state-owned China Southern Power Grid purchased 28% of Transelec, and before that, at the end of 2015, the State Power Investment Corporation acquired Pacific Hydro. As long as there are sellers willing to sell, nothing prevents Chinese state-owned enterprises from continuing to buy electric assets located in Chile.

Except for the labor concerns of workers and the Seremi regarding the new owners maintaining service quality, no one has paid attention to the fact that this and other purchases are by Chinese state-owned enterprises whose owner is the People’s Republic of China.

The acquisitions made were conducted in accordance with the rules and in compliance with the law. There is nothing to observe in that regard, but it should be a cause for concern that the purchases are made by state-owned enterprises from another sovereign state. One wonders how the SEC would handle potential fines and sanctions, which occur with some frequency in regulated basic services. I raise this point because for Chile, it is not the same to sanction a private company as it is to sanction a company whose owner is the second largest power in the world, which has recently given some lessons to Chilean politicians regarding how to behave and relate to them. In this same vein, can you imagine the problem that would arise in the event of a potential sanctioning process for the revocation of a concession? This is not a remote issue if we consider that the concession of ESSAL in Osorno is under review.

It is very possible that the rules governing foreign investments in Chile did not consider the case of foreign state-owned enterprises, and perhaps it is time to review this. It is also very unlikely that the regulator’s intention was to transform basic service concessions into a matter of foreign policy. Granting concessions like that of Chilquinta to a company like State Grid is almost or very similar to ceding sovereignty due to the limited real capacity we have to take action on Chinese investments without it becoming a major state issue. This is not a problem exclusive to the Chinese. It is something that should be reviewed regarding any investment in concessioned services where ownership remains with a foreign state-owned enterprise.

In line with the above, perhaps we should apply the same criterion, that is, not to grant telecommunications and infrastructure concessions such as 5G networks, airports, ports, or critical public works to non-Chilean state-owned enterprises. One thing is to grant concessions for basic services and infrastructure, and another is to leave it in the hands of other states. Apparently, we will have to revive the old concept of strategic enterprises.

To conclude, and returning to the Chinese, I cannot understand the purpose of their investments in infrastructure and basic services in other countries other than a non-economic interest.

Source: El Mercurio de Valparaíso