With strong growth in demand forecast, the company will issue 240 million A shares to help fund new power plants Shanghai Electric Power plans to raise 1.35 billion yuan (HK$1.26 billion) through an A-share offer, using the proceeds to invest in three new-generation plants and fend off competitors such as the Three Gorges hydro-power and Qinshan nuclear projects. The company is one of the largest electricity generators in the city and has been preparing to go public for at least four years. Its offer comes after China Yangtze Three Gorges Project Development was forced to delay its 10 billion yuan listing because of regulatory fears that such a huge issue would further dampen the already weak A-share market. Shanghai Electric will offer 240 million shares at 5.8 yuan each, representing a price-to-earnings ratio of 18.52 times last year's earnings. This price-to-earnings ratio compares with 23.92 times for A-share Huaneng Power International, 21.93 times for SP Power Development, 28.7 times for Shanxi Zhangze Electric Power and 27.62 times for Chongqing Jiulong Electric Power. Chronic power shortages affected Shanghai this summer, forcing the city to ration electricity to thousands of companies. Shanghai consumed 63.37 billion kilowatt hours (kWh) of power last year against local production of just 55.89 billion kWh. The remainder had to be imported from other provinces. Power demand in Shanghai is forecast to grow by four billion kWh annually in the next few years. Local power producers will face rising competition from the Three Gorges project in Sichuan, which will deliver 1.8 billion kWh to the city this year and 12.7 billion kWh by 2009. At the end of June, Shanghai Electric had 2,865 megawatts (MW) of generation capacity, accounting for 29.2 per cent of Shanghai's total capacity of 9,820 MW. Under the mainland's ongoing power industry reforms, Shanghai Electric's former parent - Shanghai City Power - was restructured into a distribution company and its generation assets transferred to China Power Investment Group, one of five generation giants created at the end of last year in the overhaul of former industry giant State Power Corp. Shanghai Electric will become China Power Investment's third A-share vehicle, after Shanxi Zhangze and Chongqing Jiulong. In the first half of this year, Shanghai Electric generated 8.52 billion kWh of power, or 25.6 per cent of the city's total power output. Net profit came to 456.34 million yuan on turnover of 2.72 billion yuan. Last year, net profit fell to 609.66 million yuan from 656.90 million in 2001, despite turnover rising to 5.34 billion yuan from 5.02 billion yuan. The company blamed last year's lower profit on higher interest costs stemming from the completion of a project. No profit forecast was given for this year. Net proceeds from the listing will be used to build the second phase of a 10.66 billion yuan, 1,800 MW plant in Waigaoqiao, in which the company has a 20 per cent stake and needs to contribute 664 million yuan in equity. Proceeds will also partly fund the 2.81 billion yuan Shanghai Petrochemical Park steam and power project and a 2.41 billion yuan, 600 MW natural gas-fired power plant.