Germany has cited "security" reasons for buying a 20 percent stake in German-based company 50Hertz, effectively boxing out China's power distributor. Around 18 million Germans depend on 50Hertz for electricity.
A government-owned bank in Germany has been instructed to buy a 20 percent share of the power distributing company 50Hertz, reportedly thwarting the State Grid Corporation of China (SGCC) from acquiring a share.
German ministries of economy and finance announced the buy on Friday, saying that the move was motivated by "considerations of security policy." Berlin has a "strong interest to protect critical energy infrastructure," officials said in a statement.
The 1000-strong company supplies electricity to some 18 million people in northeast Germany.
Belgian electricity operator Elia currently owns 100 percent of the German-based 50Hertz, after buying out Australia's IFM.
The Australian infrastructure fund held a 40 percent stake until earlier this year, when it signaled it wanted to sell the first 20 percent share. Beijing-backed SGCC reportedly made attempts to buy it. However, German government pressured Elia into using its "right of first refusal," which grants them priority in such deals. The Belgian group eventually agreed to increase its share from 60 to 80 percent.
With IFM now selling the remaining one-fifth, Elia invoked its priority again to buy it, only to immediately sell it to the government-owned KfW bank.
However, German officials said the buy is temporary and the stake would be sold off "in the future."
50Hertz praised the government move, saying it showed "the fundamental importance of the distribution net within our country's critical infrastructure."
In recent years, European companies and politicians have mounted criticism over China's strategic push into EU markets and infrastructure, accusing Beijing of blocking its own key resources from foreign investors.
The world's largest electric utility aims to acquire a stake in 50Hertz — a joint venture which owns a huge chunk of the German electricity grid. The plan is likely to stir controversy over China's influence.