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China Guodian plans Hong Kong listing
By Francesco Guerrera in Hong Kong
Published: May 2 2004
China Guodian, one of the "big five" state-owned power generators, is planning a Hong Kong listing that could value it at some $2bn and enable it to capitalise on China's strong demand for energy.
People close to the company said it would invite investment banks to bid
for an advisory role in the initial public offering in the next few weeks.
If Guodian decides to go ahead with the IPO, it could be listed in Hong
Kong towards the end of this year or the beginning of 2005.
The company is likely to sell a stake of about 25 per cent to investors,
which could raise some $500m and value the whole group at $2bn.
The funds raised could be used to build more capacity to counter China's
chronic shortage of electricity, which has caused power cuts across the
country.
However, people close to the company stressed no final decision on the
timing and size of the IPO had been taken and the listing could yet be
scrapped.
The planned move by Guodian, the last of the "big five" to seek
an overseas IPO, comes amid sharp falls in Hong Kong-listed Chinese stocks
due to fears of an economic slowdown.
However, analysts believe China's strong demand for energy, which is
expected to increase at 16-17 per cent a year for the next few years, should
ensure a strong investor appetite for power generation companies.
Shares in China's Hong Kong-listed power generators such as Huaneng
Power, Beijing Datang and China Resources Power, have risen some 10 per cent
this year despite falls in most other China-related stocks.
Two of Guodian's rivals, China Power International (CPI) and the smaller
group Shenzhen Energy, are finalising plans for Hong Kong IPOs that could
raise $500m each.
These listings - expected before the end of the year - will help Guodian
to gauge investors' interest in China's power companies.
Guodian's valuation will depend on what assets it decides to list in Hong
Kong. Its parent company has about 30,000MW of generating capacity across
China. However, some of the assets are already listed in SP Power
Development, whose shares trade on the Shanghai stock exchange.
People close to the company said Guodian had still not decided which
banks to invite to pitch for the advisory mandate. However, "bulge
bracket" firms such as Merrill Lynch and UBS could be out of the
running as they are advising CPI. JP Morgan, which is arranging Shenzhen
Energy's deal, could also be prevented from bidding. The potential conflicts
of interest could make it easier for other banks to win the deal.
The company and the investment banks declined to comment.
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