China Huadian’s renewable energy unit files for US$4.5 billion Shanghai IPO to fund expansion of solar and wind capacity

Huadian New Energy, the renewable energy unit of China Huadian, one of China’s five state-owned electricity generators, aims to raise about 30 billion yuan (US$4.5 billion) via a listing on the Shanghai Stock Exchange, according to its draft initial public offering (IPO) filing.

The Beijing-based company, which is engaged in solar and wind power generation and claims to have 27.24 gigawatts (GW) of installed capacity, is seeking the A-share listing after it was delisted from the Hong Kong bourse following a privatisation deal by its parent company in June 2020.

Previously called Huadian Fuxin Energy, the company is seeking to raise a far higher amount than the US$319 million it raised in its 2012 Hong Kong IPO. China Huadian owns about 83.4 per cent of Huadian New Energy through its subsidiary and an affiliate company.

Huadian New Energy plans to issue new shares amounting to at least 15 per cent and no more than 30 per cent of its enlarged issued share capital, including an overallotment option if there is strong demand.

“The company has seized upon the opportunities given by government policies to quickly expand our installed capacity,” it said in the draft prospectus filed late last week. “However, if policies for the renewable energy sector were to change significantly going forward, it would be unfavourable to the company’s future growth.”

China’s top economic regulator, the National Development and Reform Commission, in June unveiled a new plan for renewable energy during the 14th five-year period, which runs from 2021 through 2025. Aiming to guide development of the sector in support of China’s 2060 carbon-neutral goals, the plan calls for increasing the installed capacity of wind and solar power to 1,200GW and raising the share of energy generated without fossil fuels to 25 per cent by 2030, compared with 20 per cent in 2020.

Huadian New Energy said it will use the IPO funds to expand its generation capacity and replenish its working capital. It is planning to build 15.2GW of additional capacity across 23 provinces and municipalities.

The company’s flotation attempt in Shanghai underlines a broader trend of Chinese issuers raising funds back home rather than in the Hong Kong capital market, where nearly 90 per cent of total IPO funds raised come from China-based companies. In the first half of this year the Shanghai Stock Exchange overtook Nasdaq and Hong Kong as the world’s top IPO venue, helped by the jumbo IPOs of leading mainland Chinese companies such as China Mobile and CNOOC, both of which had seen their shares delisted in the US.

Thanks to a series of market reforms in recent years that streamline the process for new issuers to get listed on the Shanghai and Shenzhen bourses, more Chinese companies have chosen to seek A-share listings there to diversify their investor base even if they already have a Hong Kong listing.

Huadian New Energy’s 2021 net profit rose 78 per cent year on year to 7.2 billion yuan. For the first quarter of 2022 its net profit stood at 2.1 billion yuan.

CICC and Huatai United Securities are the joint sponsors of the deal.