H-share listing candidate Shanghai Municipal Electric Power Co (SMEPC) will hive off five power plants in a dual listing in Hong Kong and London to raise US$350 million in the first half of next year to fund expansion plans, company officials said yesterday.
The plants, which account for 46.8 per cent of SMEPC's power-generating capacity, have a combined installation power capacity of 3,187 megawatts, in which the listed entity has attributable interests in 2,287 MW.
Other investors in the plants included Shenery Co, which has listed A shares in Shanghai, and China Eastern Power Corp. Their interests would not be listed.
The initial public offering, which was for 25 per cent of the company, has been rescheduled from the end of this year to next year on delays of asset restructuring, officials said.
Listing proceeds would largely be used to fund the construction of large-scale generating units in an effort by SMEPC to double its power-generating capacity to exceed 6,000 MWs within five years.
The aim was designed to help alleviate Shanghai's acute power shortage.
NatWest Markets is understood to be the sponsor of the issue.
The plants being grouped for the flotation are in the Wujiang, Minhang, Yangshupu, Nanshi and Waigaoqiao districts in Shanghai. They have combined assets of 7.47 billion yuan (about HK$6.95 billion) and net assets worth 4.23 billion yuan.
SMEPC is one of the mainland's six power companies - the biggest industrial group - among 38 companies chosen by the mainland's securities bodies to sell shares abroad.
The basis for calculating tariffs would be 15 per cent on net-fixed assets, as with many other power companies listed abroad such as Beijing Datang Power Generation Co, which is the first company to seek a dual listing in both Hong Kong and London early this year.
Company officials said the average rate of increase in tariff in recent years was between about five and six fen a year, or about 7 to 8 per cent.
Shanghai's present charge for electricity was 60 fen per kilowatt hour.
According to the officials, the listing proceeds would be used to buy new generators for three power plants.
The first project is to replace inefficient generators of the company's 100 per cent owned Yangshupu power plant with two new 125 MW thermal generators to maintain its competence. The purchase cost 1.5 billion yuan.
About 570 million yuan would be funded by the listing proceeds, as the bulk of the investment has already been secured from banks and government loans.
The second project is to build two new 600-MW units for the Wujing Power Plant, with SMEPC holding a 50 per cent stake. Construction is expected to begin by the end of this year with the two units expected to come into operation in the year 2000 and 2001. Total cost amounted to 7.4 billion yuan.
Also being planned are two 1,000 MW units for Waigaoqiao power plant, in which the listed entity would have a minority stake of 10 per cent.
The flotation would fund part of the investment totalling 15 billion yuan, alongside World Bank loans. Work was scheduled to begin next year with the units beginning to generate power in 2002 and 2003.
Last year, SMEPC, which has ownership in eight power plants, managed four power plants and operated three power distribution networks, made a net profit of 670 million yuan on the back of 12.5 billion yuan in revenue.
The officials said those power plants owned by SMEPC which were not included in the listing would not inject into the listed company, but would be packaged to form another company for listing.