CLP Group

CLP says it’s keen to bid 17pc of Yangjiang power plant put up for auction by CGN

An auction of the stake may fetch 5 billion yuan

PUBLISHED : Tuesday, 11 October, 2016, 8:02pm
UPDATED : Tuesday, 11 October, 2016, 10:42pm

CLP Holdings said it’s keen to bid for a 17 per cent stake in a nuclear power plant that’s due to be auctioned by its business partner CGN Power, five years after a plan to invest in the project fell through.

“CLP has for a long time expressed interest in further investments in nuclear in China and we will quite possibly have a look at it,” the company’s spokesperson said in a statement.

CGN last Friday said in a filing to Hong Kong’s stock exchange that it plans to dispose of the minority stake via the China Beijing Equity Exchange, at a tender price of 5 billion yuan (US$744 million).

The plant is located in Yangjiang, 210 kilometres west-south-west of Hong Kong.

CGN, the listed unit of China’s largest nuclear power projects developer - state-owned China General Nuclear Power - will still hold a majority 61.2 per cent stake in the plant after the proposed sale.

It said the sale would help introduce “other appropriate shareholders,” improve its governance and management and expand its market share.

The prospective buyer must provide a written undertaking that it “can provide a strategic solution” to help Yangjiang expand sales in the electricity market.

Utilisation of mainland Chinese power plants have been falling, including nuclear ones, due to excess capacity and weak demand growth.

Investing in nuclear plants could potentially help CLP, the larger of Hong Kong’s two power utilities, meet its target of having 30 per cent of generation capacity coming from non-carbon emitting sources by 2020, up from 12 per cent in 2007.

Prospective bidder for the Yangjiang stake must have over 10 years of experience in the nuclear power generation industry.

CLP owns 25 per cent of the 22 year-old Daya Bay nuclear power plant in east Shenzhen, and buys 80 per cent of its output for its customers in Hong Kong. CGN owns the rest.

CLP said in July 2011 it would invest 4.8 billion yuan toward a 17 per cent stake in the Yangjiang plant which was under construction at the time, four months after Japan’s Fukushima nuclear disaster.

In September 2013, CLP said talks on the 17 per cent stake investment were suspended, citing delays both on approval by Beijing on the purchase and construction of the Yangjiang plant, following the post-Fukushima nuclear industry review.

Dennis Ip, Daiwa Capital Markets’ head of Hong Kong and China utilities, renewables and environment research, speculated in a report that CGN may use the proceeds to fund the acquisition of assets from its parent for 9.9 billion yuan announced late last month.

They include a 61 per cent stake in a nuclear project in Fangchenggang in Guangxi province, 100 per cent of a planned nuclear plant in Lufeng, Guangdong and 100 per cent of a firm that provides reactor construction management firm.

The proceeds from the Yangjiang sale could help lower CGN’s net debt-to-shareholders’ equity ratio to 165 per cent from 175 per cent after buying the three assets, Ip estimated.

Three of the Yangjiang plant’s units are in commercial operation, with three more slated to come on stream between 2018 and 2020, according to the Daiwa report.

Each has 1,086 megawatts of generating capacity, enough to meet roughly 800,000 mainland Chinese households’ annual power needs.