Failed listing to hit profit of Huaneng Renewables
Listing hopeful Huaneng Renewables - a unit of China's largest power producer, China Huaneng Group - forecast that its profit will at least double this year because of a rise in the number of wind farms.
However, the projection is 25 per cent lower than an analysts' forecast in December, when it launched an initial public offering that was later withdrawn because of poor investor appetite.
Huaneng Renewables said in its preliminary listing prospectus released yesterday that it expects a net profit of not less than 1.07 billion yuan (HK$1.28 billion) this year.
It reported a profit of 528.3 million yuan for last year, slightly ahead of its own forecast in December of at least 511.3 million yuan and double its 264.4 million yuan profit for 2009.
The company has set an indicative price range for its shares of HK$2.28 to HK$2.98 apiece. It is offering 2.48 billion shares, to raise a total of HK$5.65 billion to HK$7.39 billion.
The price range is 14.8 times to 19.3 times its forecast earnings per share of 12.9 fen for this year.
China Longyuan Power Group trades at 19 times this year's projected profit, while China Datang Renewable Power fetches 13.4 times.
Huaneng Renewables' multiple range is the same as in its December IPO attempt, but the offer price is 25 per cent down on the earlier range of HK$2.98 to HK$3.98.
A person familiar with the deal said the reduced profit forecast was partly due to project delays but mostly because of higher interest expenses stemming from the failed listing.
The firm incurred 515.1 million yuan in interest expenses last year and had 20.67 billion yuan in borrowing at the end of March. Its net debt amounted to 3.2 times its shareholders' equity at the end of last year.
The company plans to use HK$3.6 billion, or 58 per cent of the listing proceeds to build more wind farms, HK$1.2 billion to repay bank loans, and HK$1.44 billion to buy wind farms on the mainland and overseas.
It aims to raise its installed generating capacity to 5.1 gigawatts by the end of the year from 3.52GW a year earlier. At the end of last year, it had 1.2GW of wind farms under construction, and projects in the development pipeline have total potential generating capacity of 73.46GW.
It warned that just over two-thirds of its installed capacity is in Inner Mongolia and Liaoning province, where lagging power grid expansion meant it had to shut down turbines last year. It was unable to quantify the impact but said it could not claim compensation for reduced revenues.
The minimum net profit, in yuan, Huaneng Renewables forecasts it will post for the year
- Last year's profit was 528.3 million yuan