China’s nuclear power giant CGN to sell up to 5 billion new shares to fund reactor construction
Based on Monday’s share price, the sale could raise over US$1 billion
Shares of CGN Power, China's largest nuclear power producer, surged as much as five per cent after it unveiled a plan to sell new shares, equivalent to a 10 per cent stake, to fund construction of four reactors.
The Shenzhen-based company said it would seek approval from shareholders and the market regulator, the China Securities Regulatory Commission, to issue up to 5.05 billion new A shares to be listed in Shenzhen to finance the projects with capacity amounting to just over a fifth of the firm’s current total.
“Proceeds raised from the A share offering … will be mainly used for the construction of nuclear power plants,” it said in a filing to Hong Kong’s stock exchange on Sunday. “On completion of construction and commencement of production, the installed operating capacity of the nuclear power units of the company will be increased by [4.53 gigawatts].”
CGN Power shares ended the Hong Kong morning session 3 per cent higher at HK$2.06. At this price, the firm could potentially raise HK$10.4 billion (US$1.33 billion).
The actual price of the shares to be sold will be determined after consulting fund managers on their level of interest at various price points, and the number of shares to be sold will be subject to market conditions.
The company managed 20 operating reactors at the end of June last year with total installed capacity of 21.47 gigawatts (GW), while another eight units with 10.27GW of capacity were under construction.
It accounted for 61.8 per cent of the nation’s total nuclear capacity in operation and 44 per cent of that under construction.
China aims to raise its total installed nuclear power capacity to 58 gigawatts by the end of 2020 from 34.73GW last year, as part of efforts to tackle air pollution caused by coal burning.
CGN Power would also use some of the proceeds to bolster working capital, “further optimise [its] financial structure and reduce financial risks,” it said.
Its fundraising plan comes as the firm struggles with major delays and cost overruns of its third-generation nuclear project in Taishan, in the southern Guangdong province, and has to cope with lower utilisation and lower power prices for some its operating units amid a capacity glut and deregulation that increased competition.
The four reactors to be partly financed by the proceeds include units five and six of the Yangjiang nuclear plant some 227 kilometres (141 miles) from Hong Kong, and units three and four of the Fangchenggang plant in the southern Guangxi Zhuang autonomous region.
CLP Holdings, the sole power supplier to Kowloon and the New Territories in Hong Kong, in 2016 bought a 17 per cent stake in the Yangjiang plant from CGN Power, leaving the latter and companies associated with it with a combined 66 per cent interest. State-backed power generator Guangdong Yuedean Group owns another 17 per cent.
The first four reactors of the Yangjiang plant commenced operation between 2014 and last year. Unit five is expected to come on stream in this year’s second half and unit six in the second half of next year, CGN Power said in August last year.
Units three and four of the Fangchenggang plant are scheduled for commissioning in 2022.