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China Owns a Utility . . .

03/24/2010

Back in 2005, Public Citizen raised the issue of how deregulation would allow foreign governments to own U.S. electric utilities. Now, we didn’t say that because we’re xenophobic – we were merely raising a point that just years after the entire Western United States lost any ability to protect consumers because of deregulation and Enron, consumer protections were being further eviscerated with the repeal of PUHCA. If holding US-based corporations accountable is hard enough, imagine how tough it can be when they are located a world away or controlled by a non-democratic country like China.

Well, on March 9 the Federal Energy Regulatory Commission allowed China Investment Corp – wholly owned by the Chinese national government – to acquire 15% of US electric power company AES for $1.58 billion. China Investment Corp created a special subsidiary called – get this – “Terrific Investment Corporation” which will partially own AES’ 13,000 MW of power plants across the US, including the utility Indianapolis Power & Light. And you thought Indy had it bad when the Colts allowed the underdog Saints to beat ’em in the Super Bowl.

Now, China Investment Corp is a $300 billion fund, with billions invested in hedge funds and private equity funds that we don’t have public information on because those private pools of capital aren’t publically traded, (as they write in their FERC filing, “CIC has invested in various private equity funds and other funds, which may in turn have some level of investment directly or indirectly in energy assets”.)  But thanks to a recent filing with the Securities and Exchange Commission we now have detail on China Investment Corp’s holding of publically traded shares. A smattering:

-200,000 shares of natural gas driller Chesapeake Energy Corp, 100,000 of the natural gas firm Anadarko, 100,000 shares of oil refiner Valero,  200,000 shares of refiner Tesoro & 100,000 of driller Noble Corp. Of course China Investment Corp loves Wall Street’s energy traders, owning 1.3 million shares of Bank of America, 9 million shares of Citigroup, 60 million shares of Morgan Stanley and 1.15 million shares of Wells Fargo (what, Goldman Sachs ain’t good enough for ya?!). The love doesn’t stop there. China Investment Corp owns 2 million shares of United States Oil Fund, which speculates on crude oil prices. 

China Investment Corp also indirectly owns energy shares through various funds, such as the 3 million shares it owns of S&P Global Energy Fund, and 4.1 million shares in the Exchange Traded Fund (ETF) International Energy SPDR.

Now, you probably won’t hear any of this on Fox News, since China Investment Corp owns 300,000 shares of Fox’s parent company, News Corp.

Now, there’s been some unneccessary hysteria about China, for example the lie that they were drilling off Cuba’s coast, providing fodder for the “Drill Here! Drill Now! Pay Less” crowd.

But some of that hysteria found its way into the Energy Policy Act of 2005, specifically section 1837 of HR 6 which required a 120-day review before any chinese government purchase of U.S. energy assets – thereby squelching China’s bid for Unocal (and thereby opening the door for ChevronTexaco’s successful conquest).

While China hasn’t been drilling off the coast, they have been investing in US wind farms and PetroChina has leased 5 million barrels of crude oil storage at the NuStar St Eustatius oil terminal in the Caribbean.

Our point is that if sovereign wealth funds controlled by the Chinese government start buying utilities, perhaps we should have a little bit of scrutiny of these acquisitions, not just the rubber stamp that FERC reflexively gives to every acquisition and merger that comes across its desk.

-Tyson Slocum

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One Comment leave one →
  1. 04/28/2010 10:47 pm

    I think it’s China’s finance minister who suggested we be nice to countries who lend us money. Word.

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