Analysis on Successful Strategy of SGCC in International M&A
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Abstract
Chinese electric power, representative of international cooperation in high-end equipment and manufacture industry, is going to the world, acting as the pioneer of "the Belt and Road Initiative (B&R)" , the new national strategy of China. State Grid Corporation of China (SGCC), the leading electric enterprise in China, has scrambled nine important projects in the international competition so far. This represents its international strategy. These international projects bring huge returns to SGCC. SGCC's Return on Equity (ROE) of oversea projects surpasses double-digit, being several times higher than the ROE of SGCC as the whole entity. This paper focuses on analysis on key question on what strategies SGCC crafted resulting in its success of international competition.Specifically, there are three aspects involved in this paper. Firstly, SGCC selects projects by three main dimensions, asset type, asset quality, and strategic synergy. Second, SGCC employ different approaches to bid and complete project, such as direct investment in developed markets and obtaining franchise rights in new markets. Finally, SGCC emphasizes on market mature, and transparent policies of target markets, which is counted as the most important consideration of its investment decision. Additionally, SGCC is good at leveraging capital in investing by the low WACC.
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