Huaneng buys 24pc stake in Yuedian

PUBLISHED : Wednesday, 09 August, 2006, 12:00am
UPDATED : Wednesday, 09 August, 2006, 12:00am

Power producer lifts presence in lucrative Guangdong market

China Huaneng Group, parent of listed Huaneng Power International, has signed an agreement to buy a 24 per cent stake in Guangdong Yuedian Group to become the second-largest shareholder of the province's largest power producer.

The deal is the latest of an acquisition spree by China Huaneng since 2003 to bolster its network and establish a strong presence in Guangdong - one of the most lucrative power markets in China.

The acquisition would boost assets available to be sold to Huaneng Power, although analysts said poor investors' sentiment and Huaneng Power's heavy debts meant any asset injection would unlikely take place in the short term.

The companies said the agreement fulfilled the central government's wish to push forward the reform of state-owned enterprises by introducing multiple shareholders to improve efficiency and corporate governance.

China Huaneng officials said it was too early to tell the transaction price, because the deal was still subject to asset valuation and negotiations.

At the end of last year, Yuedian's total assets amounted to 71.4 billion yuan. Its operations include coal-fired, hydro and nuclear power generation, as well as coal procurement and transportation.

With total installed generation capacity of 11,330 megawatts, Yuedian is Guangdong's largest power generator and one of the country's largest local government-backed power groups. It has about 40 per cent of the Guangdong market.

Yuedian's mainland-listed unit Guangdong Electric Power Development had 2,831 megawatts of effective capacity at the end of last year.

China Huaneng, one of the big five state-owned power groups, had 76 power plants in 23 administrative regions with total capacity of 43,214 megawatts at the end of last year.

Huaneng Power has 23,882 megawatts of total installed capacity by equity interest.

This is the fifth acquisition of China Huaneng since its formation as part of the breakup of former industry giant State Power Corp in 2002.

A power industry executive said China Huaneng had long been eyeing the affluent Guangdong market, which was still under-supplied and had some of the highest tariffs in the country.

'Its chairman Li Xiaopeng wields a lot of influence in the central government, in the long term I can foresee China Huaneng gaining control of Guangdong Yuedian,' he said, adding the alliance would help Yuedian gain government approval for new power projects.

'China Huaneng will step up cooperation with Guangdong in the future,' Mr Li said in a signing ceremony. 'This agreement is only a starting point.'