A state-owned machinery and engineering company is seeking approval from mainland authorities to acquire a substantial stake in Hong-Kong-listed energy firm Sino Prosper Holdings. Sino Prosper executive director Barry Wong Wa-tak confirmed that China National Machinery and Equipment Import and Export Corp (CMEC) had sought government approval to take a 6.53 per cent stake in the company. CMEC agreed to team up with Sino Prosper in April last year to develop an Indonesian bitumen mine extraction lease on Buton Island. Under the agreement, CMEC would invest US$45 million or 90 per cent of total investment in the project. Sino Prosper later granted an option agreement to the company on a share placement of 80 million Sino Prosper shares. 'CMEC will be responsible for all machinery matters of the Indonesian project. Having CMEC to take a stake at Sino Prosper will enable us to leverage on their expertise in engineering and technology,' said Mr Wong. The bitumen, which will start being extracted next year at Buton Island, will be sold on the mainland. The possible tie-up would mean a second state-owned enterprise taking an interest in Sino Prosper Holdings which is tapping the mainland's energy market. Beijing China Metallurgy Investment (CMI), under the China Iron and Steel Association and which specialises in mining, earlier obtained approvals from the National Development and Reform Commission as well as the Beijing Municipal Bureau of Commerce to take a 4.06 per cent stake in Sino Prosper. Before taking the stake, CMI had linked with Sino Prosper in developing a Xinjiang coal mine extraction lease. Production will start in 2008 with annual production of 1.8 million tonnes. Meanwhile, trading in Sino Prosper shares was suspended late last week pending an announcement. Mr Wong said the announcement was related to Sino Prosper acquiring a subsidiary of a Thailand-listed energy company. Without specifying the investment involved, he said the Thailand subsidiary owned a licence for local ethanol production and distribution. 'The Thailand government requires that fuel for vehicles contain 10 per cent ethanol and 90 per cent petrol by next year. The proportion of ethanol will be raised to 20 per cent in 2010,' Mr Wong said, adding that 20 licences for ethanol production had been granted. Mr Wong said that while Sino Prosper had $140 million cash on hand - mostly from the disposal of its property investments in the past two years - the Thailand project might also require bank borrowing. The company was looking to team up with overseas investors, he said.