Investment

Huaneng to raise $1.47b from HK offering

By Mao Lijun and Xiao Wan (China Daily)
Updated: 2010-08-17 15:28

BEIJING - Huaneng New Energy Industrial Co, the wind power unit of the country's top power producer China Huaneng Group, plans to raise as much as 10 billion yuan ($1.47 billion) through an initial public offering (IPO) in Hong Kong within this year, a source familiar with the matter said on Monday.

The Beijing-based company plans to issue no more than 2.9 billion shares in Hong Kong, with a price of between 3 to 4 yuan for each share, said the source, who did not want to be named.

The company has hired China International Capital Corp, Morgan Stanley, Goldman Sachs Group Inc, and Macquaire Group to arrange the IPO, said the source.

The move well reflects the boom in the domestic renewable energy sector. An increasing number of enterprises have set their sights on the industry for further expansion, as it fits well with the nation's efforts in energy conservation and environmental protection, said analysts.

Development of renewable energy is a must for the nation to achieve its twin goals of reducing carbon intensity by 40 to 45 percent in 2020 from the 2005 level, and to increase the use of non-fossil energy to 15 percent of its primary energy consumption, the sources said.

"I am optimistic about the earnings per share of Huaneng New Energy," said Peng Quangang, an analyst tracking the power sector at China Merchants Securities. He said the present power tariffs give ample room for wind power makers to realize profits.

At present the on-grid power tariff set by the government is around 0.5 to 0.6 yuan per kilowatt-hour (kWh).

"Enterprises will become more market-oriented in making development strategies after going public, which would be beneficial to the healthy growth of the whole industry," said Shi Pengfei, deputy president of the Chinese Wind Energy Association.

As for the profitability of each enterprise, it largely depends on factors such as the wind resources it holds, and its capability in connecting power plants with power grids, he said.

Though many large State-owned enterprises (SOE) are focusing on wind power development, Shi said he is not unduly worried about the so-called monopoly in the industry.

China's five major power producers, China Huaneng Group, China Datang Corp, China Huadian Corp, China Guodian Corp and China Power Investment Corp have all set ambitious targets for wind power. China Datang Corp has recently firmed up plans to list its wind power unit.

Power generated from wind has seen nearly 100 percent year-on-year growth in China. Development of the sector has also been highlighted in China's 12th Five-Year Plan for the energy industry, said industry insiders.

China Daily