Strategic M&A in Latin America's Power Sector: China's Expansion and the Case of Transelec

The global energy transition is reshaping cross-border mergers and acquisitions (M&A), with Latin America emerging as a pivotal frontier. Nowhere is this more evident than in Chile, where China Southern Power Grid Co. (CSG) is poised to acquire a controlling stake in Transelec SA, a $4 billion deal that could redefine the region's energy landscape. This transaction, if finalized, would mark one of the largest Chinese outbound investments of 2025 and underscore a broader strategic push by Beijing into Latin America's power infrastructure.

The Transelec Acquisition: A Strategic Power Play

CSG's interest in Transelec is not incidental. The company already holds a 28% stake in the Chilean transmission giant, acquired in 2018 for $1.3 billion from Brookfield Infrastructure China Southern Power Is Said in Talks to Buy Chile's Transelec^[1]. Now, CSG is in advanced negotiations to acquire the remaining 72% stake held by three Canadian pension funds—Canada Pension Plan Investment Board, British Columbia Investment Management Corp., and Public Sector Pension Investment Board Canadian Funds Weigh $3 Billion Stake Sale in Chile’s Transelec^[2]. This would grant CSG control of a network spanning 10,000 kilometers of transmission lines, critical for connecting Chile's renewable energy hubs to its distribution systems China Is Gobbling up Chile’s Energy Sector – The Diplomat^[3].

The deal aligns with China's broader strategy to secure access to lithium and copper, resources vital to its electric vehicle and battery industries. Chile, the world's largest lithium producer, is a linchpin in this strategy. However, regulatory hurdles loom large. Chilean authorities have grown wary of foreign state-owned enterprises dominating critical infrastructure, with legislators proposing stricter controls on such acquisitions Institute study highlights China’s expanding presence in Latin America’s energy sector^[4]. This tension reflects a global trend: as nations prioritize energy security, they are recalibrating their openness to foreign investment.

Broader Trends: Chinese M&A in Latin American Power

Transelec is but one piece of a larger puzzle. Chinese state-owned enterprises have aggressively expanded in the region's power sector. In Peru, CSG's $2.9 billion acquisition of Enel's distribution assets in 2024—now known as Pluz Energía—was hailed as a landmark cross-border deal Top cross-border M&A deal of the year: China Southern Power Grid^[5]. Similarly, State Grid Corporation of China (SGCC) has acquired two of Chile's four electricity distributors, including Chilquinta and Compañía General de Electricidad (CGE), for a combined $5 billion China and investment in electrification in Latin America^[6]. These investments are not isolated; they are part of a coordinated effort to build a footprint in Latin America's energy infrastructure.

The strategic logic is clear. Latin America's energy sector is undergoing a transformation driven by renewable energy and decarbonization. According to PwC, global M&A in energy, utilities, and resources will be shaped by the need to secure supply chains and align with net-zero goals Global M&A trends in energy, utilities and resources^[7]. For China, which faces its own energy transition challenges, Latin America offers both markets and resources. The region's lithium reserves, for instance, are second only to Australia's, while its solar and wind potential is among the world's most abundant Latin America M&A reaches $8.3 billion, poised to surpass 2020–23 levels^[8].

Regulatory and Geopolitical Challenges

Yet, these ambitions are not without friction. In Chile, concerns about foreign control of critical infrastructure have intensified. Chinese state-owned enterprises now control roughly two-thirds of the country's energy infrastructure, raising alarms about economic leverage and national security China is Expanding Its Presence in Latin America's Energy and …^[9]. Similar debates are emerging in Mexico and Brazil, where regulatory frameworks are evolving to address foreign investment risks. For example, Mexico has signed bilateral investment treaties with China, offering protections under fair and equitable treatment (FET) standards, while Brazil has opted out of the Belt and Road Initiative (BRI) amid growing anti-China sentiment Chinese investment protection in Latin America: Navigating regulatory risks through strategic^[10].

The U.S. has also stepped up its engagement, recognizing China's growing influence. The Biden administration has promoted partnerships with Latin American nations to counterbalance Chinese investments, particularly in energy and infrastructure Institute study highlights China’s expanding presence in Latin America’s energy sector^[11]. This geopolitical rivalry adds another layer of complexity for investors, who must navigate not only regulatory hurdles but also shifting alliances and strategic competition.

Risk Mitigation and Future Outlook

For investors, the key lies in balancing opportunity with risk. Thorough due diligence is paramount, particularly in assessing regulatory environments and geopolitical sensitivities. As one industry report notes, “companies must prioritize strategic diversification of supply chains and production to reduce over-reliance on any single region” Legal Strategies for Mitigating Risks in Cross-Border M&A Deals^[12]. In the case of Transelec, CSG's proposed joint bid with a Chilean partner, Patria Investments, and a Chinese sovereign wealth fund may help alleviate regulatory concerns China Power Giant Weighs Bid for Chile's Transelec Stake, Sources Say^[13]. Such partnerships can serve as a bridge between foreign investors and local stakeholders, mitigating opposition and ensuring smoother approvals.

Looking ahead, Latin America's power sector is poised for further M&A activity. The region's energy transition, coupled with its role in global supply chains for critical minerals, will continue to attract strategic buyers. However, success will depend on navigating regulatory frameworks, addressing national security concerns, and aligning with local development priorities.

Conclusion

The potential acquisition of Transelec by China Southern Power Grid is more than a corporate transaction; it is a microcosm of the broader forces reshaping global energy M&A. As Latin America's power sector becomes a battleground for strategic investment, the interplay of economic opportunity, regulatory scrutiny, and geopolitical rivalry will define the trajectory of cross-border deals. For investors, the lesson is clear: in an era of energy transition and geopolitical flux, success requires not just financial acumen but a deep understanding of the complex forces at play.