HONG KONG - China Huaneng Group, the nation's biggest electricity producer, is in advanced talks to buy a stake in Massachusetts-based power utility InterGen for about $1.2 billion, said two people with knowledge of the matter.
The State-owned Chinese company is seeking 50 percent of InterGen and may pay India's GMR Infrastructure Ltd as much as $1.4 billion including payments for taking over some non-operating assets, one of the people said.
Huaneng would gain access to 12 power plants in the United Kingdom, Netherlands, Mexico, Australia and the Philippines with what would be its biggest overseas acquisition in two years. The utility bought Singapore's Tuas Power Ltd for $3.1 billion in 2008 as the Chinese government encourages companies to invest abroad.
"It's all part of the government's push for State companies to go global and boost their international exposure," said Dave Dai, an analyst at Daiwa Capital Markets Hong Kong Ltd.
"If the stake is injected into the listed company, this may create value in terms of improving returns."
Huaneng Power International Inc, the company's Hong Kong-traded unit, rose 0.2 percent to HK$4.66 in midday trading. The stock has gained 6.2 percent this year, beating the 3.4 percent decline in the MSCI Asia Energy Index. GMR Infrastructure advanced 4.3 percent to 62.5 rupees in Mumbai.
China Investment Corp, the country's sovereign wealth fund, paid $1.58 billion last November for a 15.82 percent stake in AES Corp, the US power producer with operations in 29 countries.
In December 2007, a group led by State Grid Corp of China won a 25-year contract to operate and expand the Philippines' power grid for $3.95 billion.
GMR Infrastructure, based in Bangalore, bought 50 percent of InterGen in 2008 for $1.1 billion from a fund owned by American International Group Inc. The rest of InterGen is owned by Ontario Teachers' Pension Plan.
Arun Bhagat, head of corporate communications for GMR Group in New Delhi, and Li Zhaokui, a press official for China Huaneng, declined to comment.
Zhang Shaopeng, manager of Huaneng Power's investor relations department, couldn't be immediately reached for comment.
Established in 1985, China Huaneng produces more than 10 percent of the country's electricity, according to the company's website.
The Beijing-based utility operates 154 power plants in 27 China and in Singapore, with a combined installed capacity of 104.38 gigawatts, or about 12 percent of China's total.