Datang International Power Generation, which announced in late June it was selling its massive loss-making portfolio of coal conversion projects to its parent for a token price of one yuan, saw its shares rise after the parent agreed to buy up to HK$17.4 billion worth of the stock to help it fund new projects and repay debt.
The parent, China Datang Group, one of the big five state-owned power generation firms, agreed to buy 2.79 billion of Datang International’s Shanghai-listed A shares to be issued at 3.56 yuan each and the same number of its Hong Kong-listed H shares to be issued at HK$2.12.
The A share issue price represents a 10.55 per cent discount to the closing price on November 14, while the H shares are to be sold at a 3 per cent premium to the average closing price in the 20 trading days prior to Monday.
Of the 9.95 billion yuan A-share proceeds, some 5.55 billion yuan has been earmarked for repayment of project loans, while the rest will finance the construction of five power projects in Liaoning, Jiangsu, Hebei and Guangdong provinces.
Four of the projects have a combined annual generation capacity of 3 gigawatts, amounting to 6.9 per cent of Datang International’s installed capacity of 43.5GW at the end of June. They are co-generation projects that produce both heat and power and are high energy consumption efficiency units encouraged by Beijing. One project is also able to supply cooling besides heat and electricity.
The scale of the remaining project was not specified, but it will replace outdated small generating units with large and more efficient ones.
The proposed use of part of the proceeds from the shares issuance for the construction of power plant projects...enhances the core competitiveness of the power generation business