Power 'takeover' in China
Friday, July 6, 2007
CHINA power company China Resources Power Holdings Co Ltd has agreed to buy a Chinese power plant for US$259 million, as part of an aggressive expansion to compete with bigger rivals, sending its shares to a record high.
China Resources Power is looking to grow in China where it is battling bigger rivals such as Huaneng Power International and Datang Power to fuel the world's top energy consumer after the United States.
The company said in a statement it would issue 53.4 million new shares at HK$17.11 each, and pay 521.5 million yuan in cash to Eastern (Jinzhou) Investment Co for a 55 per cent stake in the Jinzhou power plant in northeast Liaoning province. It would pay a further 558 million yuan to exercise an agreement to buy the remaining 45 per cent.
The sale price for the new shares represents a 12.7 per cent discount to the stock's last traded price of HK$19.60, prior to a trading suspension on Tuesday.
China Resources Power shares jumped to a HK$20.40 life high yesterday. "Compared with previous acquisitions in Hebei and Jiangsu, it is pretty cheap," said one analyst at a major US investment bank, noting this was the firm's first acquisition in northeast China. "There used to be a glut in power supply in northeast China, resulting in slow government approval of building new generators. But the situation has changed now because a power shortage is looming there," the analyst added. The Jinzhou power plant has six 200-MW coal-fired power generators, and the potential to build another four 600-MW generators in the future, the company said, adding it aimed to eventually take full control of the plant.
China will face "sizable pressure" to ensure ample power during the summer despite booming growth in power output, a senior government official warned last month. January-May electricity output rose 15.8 per cent from a year earlier, the fastest rise for the period in three years, but power supplies could be strained by demand and potentially extreme weather this year. China Resources aims to double capacity in three to five years, and analysts expect it to buy more power assets this year to help hit that goal and boost earnings. UBS said that the acquisitions were key for China Resources and the company was achieving returns on more investment than its peers.
China Resources won a bid last month to buy a 44.7 percent stake in a state-run power plant in the northern province of Hebei for 530 million yuan (US$69.7 million). In May, it won a bid to buy 45 per cent of Yangzhou No 2 Power Plant in the eastern Jiangsu province for 1.81 billion yuan. Reuters
China Resources Power is looking to grow in China where it is battling bigger rivals such as Huaneng Power International and Datang Power to fuel the world's top energy consumer after the United States.
The company said in a statement it would issue 53.4 million new shares at HK$17.11 each, and pay 521.5 million yuan in cash to Eastern (Jinzhou) Investment Co for a 55 per cent stake in the Jinzhou power plant in northeast Liaoning province. It would pay a further 558 million yuan to exercise an agreement to buy the remaining 45 per cent.
The sale price for the new shares represents a 12.7 per cent discount to the stock's last traded price of HK$19.60, prior to a trading suspension on Tuesday.
China Resources Power shares jumped to a HK$20.40 life high yesterday. "Compared with previous acquisitions in Hebei and Jiangsu, it is pretty cheap," said one analyst at a major US investment bank, noting this was the firm's first acquisition in northeast China. "There used to be a glut in power supply in northeast China, resulting in slow government approval of building new generators. But the situation has changed now because a power shortage is looming there," the analyst added. The Jinzhou power plant has six 200-MW coal-fired power generators, and the potential to build another four 600-MW generators in the future, the company said, adding it aimed to eventually take full control of the plant.
China will face "sizable pressure" to ensure ample power during the summer despite booming growth in power output, a senior government official warned last month. January-May electricity output rose 15.8 per cent from a year earlier, the fastest rise for the period in three years, but power supplies could be strained by demand and potentially extreme weather this year. China Resources aims to double capacity in three to five years, and analysts expect it to buy more power assets this year to help hit that goal and boost earnings. UBS said that the acquisitions were key for China Resources and the company was achieving returns on more investment than its peers.
China Resources won a bid last month to buy a 44.7 percent stake in a state-run power plant in the northern province of Hebei for 530 million yuan (US$69.7 million). In May, it won a bid to buy 45 per cent of Yangzhou No 2 Power Plant in the eastern Jiangsu province for 1.81 billion yuan. Reuters
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