Huaneng Power to pay parent US$985m for Singapore firm
Huaneng Power International, the listed unit of the mainland's largest power producer, has made its first overseas foray by agreeing to take over its parent's stake in Singapore's Tuas Power.
The widely expected deal would add 2,670 megawatts, or 8 per cent, to Huaneng Power's generating capacity.
In a statement, the company said it would pay its parent, China Huaneng Group, US$985 million for SinoSing Power through cash and debt. The amount is equal to the capital the parent injected into SinoSing.
SinoSing last month bought 100 per cent of Singapore's Tuas Power for S$4.23 billion (HK$24.23 billion). Tuas Power is the first of three power assets to be sold by state investment firm Temasek Holdings.
In addition to the funds China Huaneng Group has already contributed as equity to SinoSing, the latter has arranged a S$2.25 billion non-recourse project loan from an overseas banking group to finance the remaining amount required to complete the acquisition of Tuas.
In a research report, Citigroup estimates that the acquisition will only add 4 per cent to Huaneng Power's net profit next year as the deal is heavily debt-financed.
The transaction will also raise Huaneng Power's net debt-to-equity ratio to 190 per cent by year-end, from 158 per cent at present, according to the report.
Meanwhile, Datang International Power Generation, the largest producer in the Beijing-Tianjin-Datang region, last night said net profit slumped by 50 per cent in the first quarter due to higher coal and interest costs and a 22-month power tariff freeze.
The company, a listed unit of state-owned national power major China Datang Group, said net profit amounted to 437.82 million yuan in the three months to March, down from 868.52 million yuan a year earlier. 'This was mainly due to increases in fuel coal prices and finance costs,' it said in a statement to Hong Kong Exchanges and Clearing.
Hopes of any power tariff increase in the short term were dashed yesterday, with Reuters quoting Xu Zhimin, a senior official at the National Development and Reform Commission's department of economic operations, as saying tariffs will only be raised when inflation levels permit.
'There are lots of appeals for power price reform,' Mr Xu was quoted as saying.
'But we must see that the market prices are still at high levels and we have a huge task of controlling prices this year.'