Huaneng returns with scaled-back offering

PUBLISHED : Thursday, 26 May, 2011, 12:00am
UPDATED : Thursday, 26 May, 2011, 12:00am


Huaneng Renewables Corp, a unit of the mainland's power producer China Huaneng Group that focuses on wind power, has cut the valuation of its relaunched initial public offering by a quarter to attract investors amid depressed interest in the sector.

Despite rosy growth prospects largely due to higher wind-power prices given by Beijing to support clean energy consumption, growth has been limited by lagging expansion of power distribution capacity.

Huaneng Renewables aims to sell 2.48 billion shares at between HK$2.28 and HK$2.98, according to a person familiar with the deal arranged by Morgan Stanley, China International Capital Corp, Goldman Sachs and Macquarie.

The number of shares is the same as in December when the firm made its first attempt to go public in Hong Kong, when the target price range was HK$2.98 to HK$3.98.

To improve the chances of a successful relaunch, Huaneng Renewables obtained commitments from 13 cornerstone investors to buy more than US$335 million of its shares, the source said. They include sovereign funds China Investment Corp and Temasek Holdings, Angang Group, General Electric, customer State Grid Corporation and rival China Huadian Group.

Last December, Huaneng Renewables offered its shares at 14.7 to 19.6 times this year's forecast net profit per share. Based on the 25 per cent discount in the relaunch, the valuation has been cut to 11.2 to 14.7 times.

A utilities analyst, who asked not to be named due to company policy, said Huaneng Renewables missed last year's profit forecast, so the relaunched offer's valuation had risen to 12.5 to 17 times. The deal's arrangers would not comment on the valuation.

China Longyuan Power Group, the nation's largest wind power producer by capacity, trades at 19 times this year's profit, while the second-largest player China Datang Corp Renewable Power fetches 13.8 times.

The analyst said it was reasonable for Longyuan to command a premium over Huaneng Renewables and for the latter to have a higher valuation than China Datang, judging from the quality of management and scale of operation.