Everbright to spin off Greentech unit via a Hong Kong IPO
China Everbright International, one of the nation’s largest developers of waste-to-energy and water treatment projects, said it plans to spin off its Greentech business and raise between HK$2.9 billion and HK$3.3 billion (US$424 million) through a stock sale on the Hong Kong Stock Exchange.
Everbright plans to offer 560 million new shares at between HK$5.18 and HK$5.90 each, according to a filing to the stock exchange, valuing the company at up to HK$11.8 billion. That would make Everbright the biggest IPO by an alternative energy company in Hong Kong since 2009, when Longyuan Power Group Corp.’s US$2.6 billion offer, according to Bloomberg data.
“People were initially concerned that the green technology business in solar and wind projects will require a lot of investment and as a result cause very volatile returns,” said UOB Kay Hian’s strategist Hannah Li. “But the plans were already mostly priced in by the market previously, while the decision to spin off the greentech business may actually help improve Everbright International’s valuations in the medium to long term.”
Everbright International’s core businesses in environmental protection and waste treatment are actually viewed quite positively, Li said.
Proceeds from the IPO could be used to finance Greentech’s investments in projects that use agricultural and forest by-products to generate electricity, according to a preliminary prospectus. Greentech’s projects are mainly located in Anhui and Jiangsu provinces.
Everbright’s chief executive Chen Xiaoping had said in February that the company had decided to delay the timing of the IPO of its greentech operations from late last year so that “both existing and new shareholders will have a chance to appreciate the 2016 results and the prospect of the 2017 operations.”
The business is expected to benefit from Chinese policies to fight environmental degradation.
The company posted a better than expected 33 per cent rise in annual profit and raised its dividend payout. It obtained 44 new projects worth 14.4 billion yuan last year - both historical records.
Net profit rose for the eighth year in 2016, advancing 33.6 per cent to HK$2.78 billion.
Everbright’s shares fell as much as 2.6 per cent amid a declining market following the company’s spin-off announcement, the biggest intraday decline in four months, before paring its losses to 1.5 per cent to HK$10.72.