State Grid stake in HK Electric Investments key to future deals
Power Assets says investment could lead to future ventures with mainland giant outside HK
Power Assets, the international utility firm controlled by Li Ka-shing, says an investment of up to HK$10 billion in its HK Electric Investments spin-off by State Grid of China opens the door to future co-operation in deals outside the city.
Canning Fok Kin-ning, the chairman of Power Assets and HK Electric, a trust company being spun off in a separate listing, said HK Electric had no plans to expand outside the city after the offering of its trust units.
But he did not rule out co-operation between state-owned State Grid and Power Assets or sister firm Cheung Kong Infrastructure, which is also controlled by Li.
"We hope to build good relations with State Grid [through its being a cornerstone investor in HK Electric]. As to other things [such as possible co-operation], they are matters of the future," Fok said, without elaborating.
HK Electric's listing document said its directors intended for it to engage solely in the power business in the city, but the firm's memorandum and articles of association do not explicitly restrict the scope of its business.
State Grid, the monopoly power distributor in 26 mainland provinces and regions, has pledged to buy 35.9 per cent of the 4.43 billion trust units on offer, or 18 per cent of the entire trust firm.
The sale of the trust units, at HK$5.45 to HK$6.30 each, is expected to raise HK$24.1 billion to HK$27.9 billion, which will be used to help pay for the acquisition of Power Assets' Hong Kong operation, the sole power generator and supplier for Hong Kong and Lamma islands.
The price range values the 123-year-old Hong Kong operation at HK$48.2 billion to HK$55.7 billion.
Power Assets' holding in the Hong Kong operation will be cut from 100 per cent to 49.9 per cent through the spin-off. After the settlement of debt owed by the Hong Kong operation to it, Power Assets could raise HK$31.7 billion to bolster its war chest for acquisitions in the global power sector.
State Grid, the world's largest power distributor, aims to have assets outside the mainland worth US$30 billion to US$50 billion by 2020, up from about US$10 billion before the HK Electric stake purchase.
It has bought power distribution assets since 2009 in the Philippines, Portugal, Brazil and Australia, including more than US$5 billion of distribution assets in the Australian state of Victoria and in Sydney last year.
Analysts have speculated that Spark Infrastructure, which owns 49 per cent stakes in three assets 51 per cent owned by Power Assets and CKI, could be State Grid's next target.
Fok would not comment when asked if Power Assets and CKI would welcome such a move.