Briefing on State Grid’s Participation
in Jointly Building “the Belt and Road”
May 8, 2017
State Grid Corporation of China (State Grid)
State Grid Corporation of China invests, constructs and operates power grids as its core business. It provides service to over 1.1 billion people in 26 provinces, autonomous regions and municipalities. With about US$ 56 billion overseas assets under its management, it is the world’s largest public utility and an influential international corporation. In 2016, State Grid ranked the 2nd on Fortune Global 500 and 1st on Top 500 Chinese Companies.
The Belt and Road Initiative has brought great opportunities to State Grid in recent years. Based on extensive consultation, joint construction, equal and shared benefits, the company focused on the countries along the Belt and Road as key destinations for global business development by implementing market-oriented projects. In the process, State Grid has given full play to its own advantages and accomplished fruitful results in its globalization.
I. Prudent investment in energy infrastructure with positive return and good market reputation.
State Grid has been actively promoting energy infrastructure asset merger and acquisition. In 2016, State Grid acquired a 54.64% stake in Brazil’s CPFL Energia for US$4.308 billion and a 24% stake in ADMIE in Greece for US$320 million. Up to now, with a total overseas investment of US$15 billion, State Grid now operates the major energy networks in the Philippines, Brazil, Portugal, Australia and Italy. These are all long-term projects relevant to the wellbeing of local people. State Grid eyes on the long perspective, making all projects profitable with an annual ROI of more than 10% through strengthening management and risk control. With steady progress in the security and efficiency of asset management, State Grid also won the recognition from regulatory authorities and local communities and established a good reputation in the international market. State Grid has been awarded the national sovereign credit rating by three major international rating agencies, S&P, Moody and Fitch, for many years. At the same time, State Grid has established overseas investment companies and built professional international financing and investment platforms to meet the funding needs to develop its international businesses. Since 2013, it has issued 11.5 billion of US dollar bonds and 2 billion of euro bonds, in which the 5-billion-dollar bond issued in April 2017 was the largest single currency bonds issued overseas among Chinese SOEs.
II. Strengthening EPC, equipment export and international productive capacity cooperation.
State Grid established a new model of international productive capacity cooperation from investment, technology, manufacturing, engineering and implementation with EPC contracting of grid transmission project as the core according to its own advantages and the need of the international market. This helps State Grid export electrical equipment, control and protection equipment, dispatching automation system and high-end electric power and electronic equipment to more than 83 countries and regions including high-end markets such as Germany and Poland. Besides, State Grid also undertook the construction of national key grid projects in Ethiopia, Poland, Myanmar and the Lao PDR. The quality of these projects was highly recognized by the local governments. The 500kV Power Transmission Project of Grand Renaissance Dam Hydropower Station in Ethiopia implemented by State Grid has been made a Patriotic Education Base for Teenagers by the Ethiopian government. During their visits to the project, World Bank officers and officials from African countries spoke highly of the project quality and technical standard. The total amount of the EPC projects, equipment export and technical consulting of contracts newly signed in 2016 totaled at US$3.3 billion, in which US$ 2.3 billion were from countries along the Belt and Road.
III. Boosting cross-border transmission projects for better grid connectivity.
Chinese President Xi Jinping proposed discussions on establishing Global Energy Interconnection (GEI) to facilitate efforts to meet global power demand with clean and green alternatives at the UN Sustainable Development Summit. Many countries along the Belt and Road have strong demands for power and energy infrastructure investment. State Grid has been actively promoting GEI at home according to the reality, making itself the power grid with largest power transmission capacity, highest level of security, integrated most installed capacity of renewable energy and the largest number of smart meters. Besides, State Grid has also managed to establish the world’s largest smart platform for the Internet of Vehicles, which laid a solid foundation for GEI and made itself competitive enough among its international peers.
Up to now, State Grid has constructed 10 cross-border power transmission lines including China-Russia, China- Mongolia and China-Kyrgyzstan lines. They have helped local energy shortage, improved access to power and promoted people-to-people exchanges. Currently, it is actively promoting Shivee-Ovoo, Mongolia-Hebei, China Project, and other cross-border power transmission projects and researching on strengthened interconnection with neighboring countries via UHV technology. To pool consensus and establish a platform for communication and cooperation, State Grid initiated and founded Global Energy Interconnection Development and Cooperation Organization (GEIDCO) in 2016. This is the first international organization in the energy sector initiated by China, which fully demonstrates State Grid’s sense of responsibility in promoting the low-carbon energy transition worldwide.
IV. Leveraging technical innovation and promoting technologies and standards going global.
State Grid regards technical innovation and leading standards as the key to “go global”. In recent years, it has refined its innovation system for better in-house innovation. The company has obtained a number of world-leading innovations with independent intellectual property rights in UHV, large grid control and smart grid. In particular, State Grid has mastered the core technologies of UHV and whole set equipment manufacturing capacity, making China the only country in the world with commercial operation of UHV transmission. The company has set up R&D institutions in Silicon Valley, US and in Berlin, Germany. Its cooperation with MIT, Stanford University and Karlsruher Institut für Technologie was to make use of overseas scientific and technological resources to carry out forefront research in energy. Its advantages in grid technologies provide an important guarantee for the implementation of the Belt and Road Initiative. Thanks to the cutting-edge technology of UHV, State Grid has won the bid for the Phase 1 and Phase 2 of Belo Monte Hydropower UHV Transmission Projects in Brazil, a major breakthrough for the company.
As technologies are going global, State Grid also actively promotes the standardization of these leading technologies, such as UHV and smart grid. It pioneers in establishing a complete set of technical standards for UHV AC/DC and smart grid technologies, leading the formulation of 39 international standards. The company is also keenly involved in the organization of international standards, supporting China to become a permanent member of the International Electrotechnical Commission (IEC). State Grid Chairman Dr. Shu Yinbiao serves as IEC Vice-President and Convener of the Market Strategy Board. State Grid independently initiated five new technical committees in IEC.
Achievements in standardization are conducive to State Grid’s participation in Belt and Road Initiative. Together with the United States, Germany and Japan, China's EV charging and swapping standards led by State Grid have become the world's major EV standard system. Some neighboring countries also use the Chinese standards and further improve their national technical standards. The National Grid Company of the Philippines (NGCP) introduced State Grid’s technical standards, which helped improve its overall operation and management.
V. Fulfilling social responsibility and branding as a responsible international corporation
During its participation in the Belt and Road Initiative, State Grid attaches great importance to and cherishes its brand image. It complies with local laws and regulations, and respects local culture, religion and customs, actively fulfilling its social responsibilities and winning recognition and respect from local governments, partners and the community in return. Moreover, State Grid adheres to a localized development, employing local staff with attention paid to cultural integration. It treats all its employees with different nationalities equally. Local employees account for over 97% of the total staff in State Grid’s overseas investments, creating a lot of jobs for the local communities. In Rio de Janeiro, the company funds the table tennis programs in 10 schools and the children’s education in the slums. The “Male Music Orchestra” has been widely praised by the local people. State Grid Brazil Holding Co. (SGBH) has been awarded twice as Brazil’s “Best Power Company of the Year”, and won the "Social Responsibility Management Best Practice Award” of United Nations Global Compact. NGCP invested by State Grid actively participates in public welfare undertakings, and supports the construction of facilities for education, culture, medical services. It donates to typhoon-stricken areas, funds 44 schools, and hands out stationery and sporting goods in the Philippines. In Australia and Portugal where State Grid operates, the company also participates in environmental protection activities, sponsors community welfare institutions and the disabled, helps orphans back to the family and adapt to the society.
Practice shows that there are broad prospects for State Grid in the Belt and Road Initiative. In the future, the company will make persistent efforts to strive for new progress in grid connectivity, greenfield project, EPC, quality asset M&A and the export of equipment, technologies and standards going global. First, it will build ongoing and contracted projects with high quality and standards. The highlights include the Phase 1 and Phase 2 of Belo Monte Hydropower UHV Transmission Projects and Phase 2 of Teles Pires Hydropower Transmission Project in Brazil, the national 500kV transmission project in Egypt, and HVDC transmission project from Matiari to Lahore in Pakistan. Secondly, it will advance cross-border transmission and energy infrastructure connectivity projects. The key tasks include the cross-border transmission and interconnection projects between China and its neighboring countries, and energy connectivity projects in countries along the Belt and Road. State Grid aims at developing the EPC and BOT market, so that China’s equipment, technology and standards can “go global”. In this way, the complete chain of “Chinese technology + Chinese standards + China Equipment + China Construction” can be applied overseas. Thirdly, it looks for opportunities for M&A and taps potential for international capacity cooperation. The company will closely follow opportunities for M&A of overseas quality grid assets and greenfield projects, innovate capacity cooperation along the Belt and Road. Fourthly, it will continue with the standardization development and globalization. It will push the standardization of more advanced technologies and strive to make them into international standards. As it strengthens the convergence of national standards along the Belt and Road, State Grid can promote standardization connectivity, removing the obstacles for grid interconnection.
Participation in the Belt and Road Initiative is the inevitable way for State Grid to grow into a leading world-class enterprise. The Company will take the initiative to be pioneering and innovative based on its realities. In accordance with marketized operation, professionalized management, and localized operation, State Grid will promote its international business to be the powerhouse of the company and make due contributions to the Belt and Road Initiative and benefit people along the route.