China Power raises funds for future

PUBLISHED : Saturday, 18 August, 2012, 12:00am
UPDATED : Saturday, 18 August, 2012, 3:10am

China Power International Development raised a total of US$300 million through a share placement and a bond issue to finance new projects and repay loans.

The company said it had completed placing about 443 million shares at HK$2.10 apiece, representing a discount of 2.86 per cent to China Power's closing share price of HK$2.16 yesterday.

The Hong Kong-listed mainland power generator also issued a five-year convertible bond valued at 1.14 billion yuan (HK$1.39 billion). If fully converted, the bonds would make up 553 million shares, or about a tenth of China Power's issued share capital.

The conversion price of HK$2.52 a share represents a premium of 14.29 per cent over the company's closing price yesterday. The bonds, which will mature by 2017, carry an annual interest rate of 2.75 per cent.

China Power chairwoman and chief executive Li Xiaolin said the money raised would be spent on capital expenditure, loan repayment and other operational expenses.

China Power will expand the capacity of at least eight coal-fired units scattered across the provinces of Shanxi, Guizhou and Jiangsu in the coming years, along with several small and medium-sized hydropower projects in the southwest. The group said it would keep looking for expansion opportunities along the coast of Guangdong province.

"The share and bond issuance has surely offered ammunition for the company's future development," Li said.

The firm said the bond issue was oversubscribed by several times, despite a slowdown in the economy.

Two analysts said the company's first-half results beat their expectations, with Citigroup raising the company's expected full-year earnings between 2012 and 2014 by a range of 13 to 32 per cent. China Power saw net profit jump 33 per cent year on year to 548 million yuan during the first six months of the year.

Securities firm Jefferies expects the benefits of a sharp decline in coal prices to be reflected in the company's results during the current half. That's because although up to 75 per cent of the company's coal supply and costs is pre-fixed by contracts, some terms are being re-negotiated in light of the drop in spot coal prices.

But BOC International slashed the company's earnings forecast between 2012 and 2014 by a range of 13 to 22 per cent due to higher contract coal prices, lower utilisation hours of thermal power plants and higher financial expenses.