Huaneng Power International, China's largest independent power producer, is the second major non-financial mainland firm to issued asset-backed securities, following China United Telecommunications. Last month, the company said it would issue 15 billion yuan of asset-backed debt securities, giving a boost to development of the financial product. Although it said it might launch the issue only within 15 months, it has triggered market expectations of more large state enterprises following suit as they can reap significant cost savings. According to China International Capital Corp's managing director of investment banking, Alex Zhao Xiaozheng, large mainland corporates are paying more than 5 per cent on their long-term bank loans. By issuing debt backed by their assets, they can lower the cost to below 2.55 per cent for debt of less than one-year maturity and to 3 per cent for paper of one-year term. 'Even if you add in other administration costs, the savings still amount to 2 per cent,' Mr Zhao said, adding that a five-year asset-backed security, although yet to be launched on the mainland, could lead to a 1 per cent saving. Companies can also achieve a higher credit rating and lower financing costs by putting assets to be securitised into a special-purpose vehicle. An official at Huaneng's rival, Datang International Power Generation, said Datang was studying the feasibility of issuing securities backed by future power sales receipts, but taking a cautious stance. 'While it will help lower costs, we also have to consider the risk involved, such as the possibility that our tariff income may become less stable in the future given the government is rolling out tariff competition,' he said. This means investors will price this risk into the interest rate they will demand. A spokesman for Huadian Power International also said the company was eyeing opportunities to issue asset-backed securities. 'I believe the market will be quite eager to snap up these securities given their scarcity, and the fact that they provide stable cash income to investors,' he said.