Honiton targets US$300m from share placement

PUBLISHED : Monday, 28 April, 2008, 12:00am
UPDATED : Monday, 28 April, 2008, 12:00am

Move precedes US$500m IPO

Honiton Energy Holdings, a London-based wind energy company that produces power in Inner Mongolia, is seeking to raise as much as US$300 million in a private placement before an initial public offering in Hong Kong as early as next year, market sources said.

'We're in the midst of arranging financing,' said Honiton chief executive Paul Eveleigh, without providing details. The company could try to raise about US$500 million from the public offering, he said.

The financing had slowed earlier this year because of disagreements between the Inner Mongolian provincial government and the National Development and Reform Commission over the structure of the deal.

'The NDRC has this standard agreement form they use on every deal' that the Inner Mongolian government did not think fit in this case, said one source who declined to provide more details.

Beijing has been trying to rein in the country's rampant economic growth by exercising more control over some development projects.

'The provinces are incentivised to have things growing more quickly so often they are more aggressive than central policy would allow,' said the manager of one investment fund. 'We've seen situations where we're ready to set up business but the provincial-level guys have said that has to go to Beijing now.'

Mr Eveleigh said he expected the financing to be completed by the end of June at the latest. Honiton in January began producing energy at a site in Bailingmiao, about 110km northeast of Mongolia's largest city, Baotou. Phase one of the Bailingmiao site could generate about 50 megawatts.

The company plans to add another 100 MW of capacity by the end of the year and a minimum of 200 MW more by the end of 2009.

The cost of building a 50 MW unit ranged from US$60 million to US$80 million, Mr Eveleigh said.

Honiton has projects planned at four other sites in Inner Mongolia, according to its website.

Inner Mongolia is a prime site for wind energy production. Its capacity factor, or the amount of time turbines operate at full speed, is between 30 per cent and 40 per cent, above the global wind farm average of 25 per cent.

Goldwind Science and Technology, China's largest wind turbine maker by market share, raised the equivalent of US$244 million from an initial public offering in Shenzhen in December.

Pacific Alliance, which invested US$35 million in the company in September last year, has seen the value of that stake rise as much as eight times, a source said.

Longyuan Electric Power Group, a wind energy producer owned by China Guodian Group, plans to raise about US$300 million in a Hong Kong offering this year, market sources said.

Beijing hopes to have 10 gigawatts of wind-generated energy installed by 2010 in an effort to reduce reliance on highly polluting coal, which accounts for about 75 per cent of all energy produced on the mainland.