Sovereign wealth fund China Investment Corporation (CIC) wants to boost exposure to LatAm, potentially via private equity. “For us Latin America is a very important region for investment,” says CIC president and CIO Gao Xiqing. He adds that CIC wants to “increase the LatAm proportion of our portfolio to match the economic contribution of LatAm to the global economy.” Noting the relative underdevelopment of LatAm public markets, Gao says that in order to achieve this increase in exposure, CIC was “looking at private equity and other direct investment opportunities.” According to Gao, LatAm represented 6.9% of CIC’s total public market investment last year. He was speaking last week at the China-LAC Business Summit, held in Chengdu, China. CIC has some $300bn in assets. At the same event, China Eximbank and the IDB signed a letter of intent to boost trade between China and LatAm/Caribbean. “We believe the partnership between China Eximbank and IDB to be a groundbreaking initiative to support increased trade activity,” says IDB president Luis Alberto Moreno.
Category: China
China Minmetals Invests in Peru
China Minmetals will invest an estimated $2.5bn in Peru’s Galeno copper mine in the Cajamarca region, according to the country’s vice minister of mines, Fernando Gala. The company’s potential investment in Peru could reach as high as $11bn, which would represent 25% of Peru’s project financing needs, he says. “This project should serve as an example to other investors from Hunan that they can come to Peru,” Gala says.
Sinopec Buys Into Brazil Via Repsol
Spain’s Repsol has sold a 40% stake in its Brazil unit to Chinese oil firm Sinopec for $7.1bn, a high price in line with recent comparables. Repsol had been planning to float the stake, but opted for a strategic sale instead. Adam Waterous, head of global investment banking at Sinopec advisor Scotia Waterous, says the deal provides significant benefit over an IPO, including access to Sinopec’s technical and crude marketing expertise, as well ties to an exploration major. “With an IPO, you’re really only getting the cash,” Waterous tells LatinFinance. The $7.1bn price is seen in line with what Repsol would have achieved in the stock market, say analysts. Repsol’s valuation represents around a 66% premium to the value analysts had assigned earlier in the year. The Repsol Brazil assets have not yet begun producing, and may not for another 2-3 years. Waterous rejects suggestions that the premium is too high, pointing out that the buyer gets minority stakes in Petrobras-managed platforms. A banker away from the deal agrees that the price is not surprising given recent comparables, such as Sinochem’s purchase of a 40% stake in Peregrino from Norway’s StatOil for $3.07bn. Even non-performing assets are achieving healthy multiples thanks to scarcity of Brazil resources, while similar plays in Argentine incur political risk. Additional capex funding will also likely be needed in the future, the banker says. Sinopec is controlled by the Chinese government, which has been aggressive in its pursuit of LatAm oil this year. Sinopec was advised by Scotia Waterous and Vinson Elkins, while Respol was advised by Latham Watkins. The transaction should make Repsol’s plans for a Brazil asset spinoff – expected at $4bn equivalent – unnecessary. It would have been the largest this year in Brazil by a non-government controlled entity. BAML, Credit Suisse, Itau and Santander won the mandate to lead the deal, for which Repsol filed a preliminary prospectus in August. Sinopec is also bidding
Bill Rhodes: The LatAm Moment
Veteran banker Bill Rhodes says shifts in global growth create opportunity for LatAm. He predicts a slowdown in the US, which he urges to strengthen ties with the region.