State Grid sells 8 coal-fired plants as industry restructuring winds up

PUBLISHED : Tuesday, 25 December, 2007, 12:00am
UPDATED : Tuesday, 25 December, 2007, 12:00am

State Grid Corp of China has agreed to sell eight coal-fired plants to seven state-owned companies, marking the completion of separating the industry's generation and distribution operations.

The power distribution monopoly, which owns all but five power grids in southern provinces, had signed transfer agreements for the 6,470 megawatt (MW) plants, the State Electricity Regulatory Commission (SERC) said.

Buyers included five national generation majors - China Huaneng Group, China Datang Group, China Huadian Group, China Power Investment Corp and China Guodian Group - and coal and power firm China Shenhua Group and regional power investor Hunan Xiangtou Holdings Group. Proceeds from their sale will be used to fund power distribution infrastructure construction and the siphoning out of non core-business operations of State Grid.

Beijing broke up former state behemoth State Power Corp's assets in 2002 into five generation groups and two distributors, as part of industry-wide reforms that also covered tariffs and competition.

The majority of State Power's generation assets were allocated to the five power generation majors, but two groups of assets were retained temporarily by State Grid on behalf of the central government.

The first batch, comprising minority stakes in 38 firms with 10,810 MW capacity, was sold for 18.7 billion yuan through open tenders last year.

The latest second batch was sold via private negotiations. While appraised asset values were used as the basis for talks, market values of similar transactions and premium for controlling stakes were also taken into account, SERC said.

Details of the deal were not disclosed, and a SERC spokesman said they would be revealed early next year.

'Considering the need to enhance asset value, stabilise operation and management and resolve historical [state ownership-related] problems, it has been decided that the five generation groups were the preferred assets sale targets,' the commission said.

According to the annual report of State Grid Xinyuan, a State Grid unit responsible for managing the assets, the eight plants are located in different places and range from 600 MW to 1,500 MW in installed capacity.

The plants form most of State Grid Xinyuan's operating assets. It is also building 10,000 MW of pump storage hydro plants that will be completed in stages by 2012. State Grid Xinyuan posted a profit of 166.84 million yuan last year, down from 405.44 million yuan in 2005, as turnover rose 4 per cent to 12.87 billion yuan.

Citigroup head of regional utilities research Pierre Lau said in a research report that State Grid's asset disposal would increase the likelihood of more asset sales from power generation groups into their listed vehicles.