China Datang Corp, the country’s second-largest power producer, plans to float shares of its renewable energy unit in a Hong Kong IPO, which is expected to raise at least $1 billion, sources close to the deal said.
Analysts expect a potential wave of issuance from the nation’s power producers at a time when valuations of Chinese wind assets are high and investors in renewable energy are seeking alternatives to out-of-favour solar.
Datang has held discussions with several banks to underwrite the offering, which includes hydro and wind power assets. None of the banks have been mandated yet. The company declined to comment.
The IPO pursuit follows plans by China’s Huaneng Group, the country’s largest power producer, to raise $1 billion through a Hong Kong IPO of its wind power unit [ID:nTOE61708D].
“Company listings could unlock the potential value of the assets and raise money in an industry that enjoys strong earnings growth potential,” said Felix Lam, analyst with CCB International.
China is now the world’s largest market for wind power after it more than doubled its wind generation capacity to 25 gigawatts last year. The nation’s unofficial target for wind capacity is at 100 to 150 GW by 2020, possibly attracting investments of over $150 billion, said analysts.
China is also a major solar producer but moves by Germany to cut subsidies have knocked confidence in the sector’s growth prospects.
China Datang Corp Renewable Power Co Ltd holds Datang’s wind and hydro assets and is the unit Datang is planning to spin off.
The parent company has not decided whether to add other power assets into the listing plan, said the sources, who were not authorised to talk to the media.
“The scale of Datang’s assets is bigger than Huaneng,” one source said, hinting that its share sale could top that of Huaneng’s.
China Datang Corp is the parent company of Hong Kong-listed China Datang International Power Generation Co (0991.HK) (601991.SS).
According to China Wind Energy Association figures, Datang Corp holds China’s second-biggest wind asset with capacity of 1,521 megawatts as of end 2008.
MORE TO FOLLOW
Other independent power producers are expected to follow in the footsteps of power company China Guodian Group which took its wind assets public via an initial share offering of unit, China Longyuan Power Corp (0916.HK) in 2009, raising $2.6 billion.
China Huadian Group and energy conglomerate Shenhua Group could be prime candidates for launching IPOs for their wind businesses, said analysts.
Huadian has close to 1,000 MW of wind power capacity as of 2008, according to a China Wind Energy Association data. Shenhua’s wind assets are bigger with capacity of 1,443 MW.
Other green IPOs in the pipeline include Chinese wind power producer Xinjiang Goldwind Science & Technology Co (002202.SZ), already listed in Shenzhen, which aims to raise $1.5 billion from a Hong Kong IPO in the first half of this year, sources told Reuters earlier. [ID:nTOE60I05Q]
CICC, Citigroup (C.N) and Haitong Securities are handling that deal.
Analysts expect plenty of the smaller but cash-generating wind companies will go public in the next few years as the market expands.
“They need capital to fund growth, and a lot of the capital would come from the public equity market,” said CCB’s Lam. ($1=HK$7.75) (Additional reporting by Michael Flaherty; Editing by Lincoln Feast)