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.