China Power pays 750m yuan in Guangzhou acquisition
China Power International Development (CPID) has made its first acquisition in Guangzhou, by agreeing to pay 749.5 million yuan for a 25 per cent stake in a leading power generator in the lucrative market.
CPID, a unit of China Power Investment Corp - one of five national power generation groups - said it had signed a legally binding framework agreement to buy into Guangzhou Power Enterprise (Group).
Guangzhou Power, wholly owned by municipal government conglomerate Guangzhou Development Group, was undergoing restructuring and would have 1,020.3 megawatts (MW) of installed generation capacity or 22.35 per cent of the city's total capacity, CPID said. It had a net asset value of 2.58 billion yuan. No historical profit figure was disclosed.
CPID vice-president Wang Zichao said Guangzhou Power was profitable but was unable to provide figures.
He said CPID had minimum profitability requirements when it acquired new power projects, but was more flexible when it came to operating ones. He would not divulge the requirements.
'We don't want to lock ourselves in by a minimum profitability figure and miss out on targets that have good strategic value,' he said.
The 25 per cent stake purchase will add 3.5 per cent to CPID's equity-calculated installed capacity of 7,215 MW. The deal came less than a year after CPID formed a 50-50 joint venture to build a 600 MW heat and power co-generation plant in the Xintang area of Guangzhou.
Guangzhou Power has 631.5 MW of co-generation plants, or 40 per cent of Guangzhou's total. Such plants are more energy efficient and less pollution prone than conventional coal-fired plants.
'In the next five years, Guangzhou Power will be developed into a large co-generation group in the Guangzhou area,' CPID said.
Power rationing-prone Guangzhou needs cleaner-burning power plants to cut pollution.
Power consumption there grew at an average 12.5 per cent between 2001 and 2005.
Separately, Citigroup head of regional utilities research Pierre Lau wrote in a research note that he believed Datang International Power Generation would buy up to 61 per cent of Shenzhen-listed chemical firm Jinhua Group Chlor-Alkali from the latter's bankrupt parent. The stake is pledged to domestic banks, while the rest of the shares are held by the public.
Datang is developing a 16.2 billion yuan coal-to-chemicals project in Inner Mongolia and its chemicals are feedstock for Jinhua.
A Datang spokesman could not be reached for comment. Trading of its A shares was suspended for up to eight trading days from Friday pending a restructuring proposal. Trading of its H shares was not halted.
Jinhua's market capitalisation stood at 4.55 billion yuan on Friday. It posted a net profit of 1.73 million yuan for this year's first nine months on turnover of 1.76 billion yuan.
Cleaning up
Guangzhou is moving towards cleaner-burning power plants to cut smog
The net asset value of co-generation operator Guangzhou Power, in yuan: 2.6b yuan
