CHINA needs power, and it needs it now. This is nothing to do with politics; but it is everything to do with economic reform. Yesterday's announcement by China Overseas and Land of an interest in a HK$900 million power project in Guangdong underlines the deep involvement Hong Kong-listed companies will have in China's electrification revolution. Hong Kong has a well-regarded utilities sector in the shape of blue-chip index constituents China Light and Power, Hongkong Electric, and Hong Kong and China Gas. The sector is due to proliferate as local and mainland groups listed locally participate in electricity production in China. Hopewell Holding's spin-off last year of Consolidated Electric Power Asia (CEPA) underlined how important these types of projects, and the companies involved, would be to Hong Kong and its stock exchange in the future. The involvement will not just involve power producers. Peregrine recently led a fund launch, involving famous American-Hungarian George Soros, to invest in power projects. Mr Soros is also raising money for his own fund in the sector, while New World Development has already launched an infrastructure fund to include power projects, listed in Dublin. Since the opening of China's economy to outside investment and market forces, which began in 1978, the country's thirst for electricity has always lagged behind production capacity. Nomura Research Institute, in a report released yesterday, estimated that by 2000 the country would have to raise generation capacity to 20,000 megawatts a year, well in excess of the existing 10,000 to 12,000 MW capacity. Analyst Jacky Chiu said: ''Consumption of electric power in China has increased substantially over the past few years; attributable to the rapid expansion of its industrial sector, an increase in the ownership of electrical appliances by Chinese families, a higher degree of office automation and increased electrification in agricultural and rural areas.'' The involvement of domestic companies so far has been mixed and piecemeal. The interests of CEPA are well documented, involving about 12 power projects from Shanghai to Guangzhou, and about 4,000 MW of power. In Guangdong alone there is expected to be exceptional growth in electricity generation capacity. Given the proximity of the projects to Hong Kong, local companies are bound to fly on the coat tails of expansion plans. A recent report in The Financial Times showed that in 1981 the province had just 2,800 MW of installed capacity. Over the next 17 years, the province hopes to increase capacity by a further 69,000 to 80,000 MW. By then it may have achieved installed capacity of one KW/hour per person, up from existing installed capacity of 0.16 KW/hours per person. By comparison, Hong Kong has installed capacity per person of 1.42 KW/ hours, Taiwan has 0.85 KW/ hours, and the US about 2.8 KW/hours. The report says Guangdong's spending on power plants had grown from US$679 million in 1989 to US$795 million in 1991. In April, China Light and Power (CLP) signed an agreement to study the joint development of three power stations in Shandong with a generating capacity of 3,600 MW - more than half the company's existing capacity in Hong Kong. The study, to be completed this year, could lead to CLP building, owning and operating three coal-fired plants in the counties of Shiheng, Heze and Jining, with Shandong Electric Power Co. China International Trust and Investment Corporation (CITIC) and its Hong Kong-listed company CITIC Pacific is becoming involved in power generation in China. The public company is also directly taking a 25 per cent stake in a HK$4 billion power station in Pudong. CITIC Pacific will inject HK$400 million and raise the remaining HK$600 million from project finance. The remaining 75 per cent of the plant will be shared by two entities in Shanghai, and the China National Energy Company. Four coal-fired generators of 300 MW each are being built. It is expected that the Pudong Power station will come into operation during the first half of 1995. Other projects include the Ligang power station in Jiangsu and the Xinli power station in Henan, which are both expected to make small contributions to 1993 earnings. New World Development is involved in a number of power projects including Zhujiang Power Station (Phase I) comprising two 300 MW coal-fired electricity power plants. Kumagai Gumi recently announced participation in power generation in a phased development in Hainan. The first phase of the HK$1.2 billion Yangpu Power Station is expected to come on stream by next month. The power station will form the backbone of the Yangpu Economic Development Zone, on the northwest tip of Hainan Island. It is the brainchild of Yu Ching-po, chairman of Kumagai in Hong Kong. To be built in two phases, the power station will comprise three diesel generators each with a capacity of 12 MW and two gas turbines each with 137 MW capacity. Cheung Kong has involvement through a number of investments, including Yiu Wing International. It has entered into an agreement with Changjiang Power Development (Hong Kong) to acquire Walton Enterprises for HK$80 million. Walton's sole asset is a 20 per cent interest in Changfa Electric Equipment, a Sino-foreign joint venture, which makes turbines and generators, and builds power stations. In February, Cheung Kong (Holdings) agreed to subscribe to Yiu Wing International's $100 million convertible note issue, which will give the property developer a 10 per cent stake in the company on conversion. In January, Dongfang Electric Company, one of the nine big mainland corporations, said it was seeking a listing on the exchange. The Sichuan province-based generator company aims to take part in the Three Gorges project - the nation's most important hydro-electric power project.
