CR Power to acquire plant stakes from parent
The $555.7m outlay adds assets in two provinces under expansion programme
China Resources Power Holdings has agreed to purchase its parent's stakes in two power companies for $555.7 million, raising its net operating generation capacity by 11.3 per cent.
The acquisitions mark another step by the fast-growing red-chip company, a unit of conglomerate China Resources (Holdings), to expand through building new plants and buying assets.
The deals will also help China Resources Power, the second-smallest Hong Kong-listed mainland electricity supplier, diversify risks by broadening its geographical reach and fuel source.
UBS head of Asian utilities research Alice Hui Suk-fong said China Resources Power's latest acquisitions had been expected, as management had indicated its six billion yuan of capital expenditure for this year already included asset acquisition from its parent.
'China Resources Power's policy is to acquire the power plants after the completion of the units ... it does not want to take up the construction risk from the parent,' she said.
In a statement to the stock exchange yesterday, the company said it would pay $436.5 million for its parent's 55 per cent stake in Fuyang China Resources Power, which runs a 1,280-megawatt (MW) coal-fired plant in Anhui province.
The plant started operations in one generating unit in March and another last month. It was approved by the government to charge a tariff of 36.9 fen per kilowatt-hour.
It will also pay $119.22 million for its parent's 65 per cent interest in Yunnan China Resources Power (Honghe), which is building a 210MW hydro plant in Yunnan province. Commercial operations are expected to begin in the fourth quarter.
China Resources said it had been managing construction of the hydro project on behalf of its parent under contract since October 2003, adding that it also intended to acquire the remaining stake in the Yunnan and Anhui projects 'when an appropriate opportunity arises'.
The management said in March that its net generation capacity was expected to almost triple from 2,949MW in 2004 to 8,494MW next year, at a compound annual growth rate of 42 per cent.
China Resources Power's spokesman said its parent still had some coal-fired power plants, on which the company had a preferential right to buy. He declined to give details about the plants or when China Resources Power may acquire them.
Both the Fuyang and Yunnan acquisitions were struck at prices almost the same as their net asset values.
China Resources Power said the Fuyang project was its first in Anhui province, while the Yunnan project was its first in the province and also its first hydro project.
'[The Yunnan project] represents the company's commitment to the expansion of its business and operations in the hydropower sector,' the company said.
The management said in March that it planned to plough six billion yuan to eight billion yuan into renewable energy projects, which were expected to account for 5 per cent to 10 per cent of the company's total generation capacity by 2010.