Datang International Power Generation will take control of a small power generator in Chongqing to increase its exposure in the hydro power business and hedge the fuel cost risks of its coal-fired operations.
The company has signed an agreement to restructure Chongqing-based Yuneng Group, under which Datang will take a 51 per cent stake for 1.28 billion yuan (HK$1.46 billion), a figure that will be adjusted subject to audit and valuation of Yuneng's assets.
Yuneng had unaudited net assets of 3.1 billion yuan at the end of last year. Besides being a regional player in the power generation business, it also has metallurgical and property assets.
It has 800 megawatts (MW) of installed generation capacity, of which 520 MW are hydro units. It also has 1,730 MW of capacity under construction or in preliminary development.
A Datang spokesman said the deal was part of the company's efforts to raise hydro power's contribution.
'Hydro power's attractiveness is set to be enhanced by the government's plan to raise its tariff to levels matching that of coal-fired power,' said BOC International analyst Peter Yao Sheng. 'Hydro power as a clean energy also has dispatch priority on the grids.'
