China Power reveals plan to buy unfinished plant from parent

Shares of China Power International Development (CPID) rose 3.89 per cent to close at HK$4.01 yesterday after the company unveiled a 944.62 million yuan purchase of an unfinished coal-fired power plant from its parent firm.

The Hong Kong-incorporated company, the smallest of the state-controlled mainland power producers by capacity listed in Hong Kong, said at the weekend it had agreed to pay China Power International Holding 180.32 million yuan cash for 100 per cent of the 600 megawatt (MW) project in Qinghe, Liaoning province.

The price was 2.2 times the project's net asset value of 80.32 million yuan, higher than CPID's market valuation of 1.4 times, said a CLSA research report.

The value was based on the difference between the target's 826.14 million yuan in assets as evaluated by China Enterprise Appraisals, and its 764.3 million yuan of liabilities.

About 1.55 billion yuan will have to be further invested in the 2.4 billion yuan project before it comes on stream at the end of next year.

A CPID spokesman said the company was shifting its acquisition focus to its parent's hydropower assets, despite the latter still holding some coal-fired plants and major stakes in coal mines.

'Hydropower projects are not affected by spiralling coal prices and falling plant utilisation [due to fast-rising new coal-fired capacity],' he said. 'While buying the coal power plants and coal mines would be feasible, they are sizeable and integrated with port, railway and aluminium smelting operations, so our parent plans to run them separately.'