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Huaneng buys stake in Guangdong firm

By Mai Dou (China Daily)
Updated: 2006-08-11 09:00

The nation's biggest power firm, China Huaneng Group, has inked a deal for a 24 per cent stake in the local government-controlled Guangdong Yuedian Group.

The Guangdong provincial government agreed to the stake transfer to Huaneng, making the Beijing-based electricity conglomerate the second-biggest stakeholder in Yuedian after the local government, Huaneng said in a statement.

Industry analysts said the alliance fits in with the business strategies of both companies, as Huaneng is planning for a bigger share in the southern market and Yuedian needs more capital to expand its portfolio.

The move will kick-start Huaneng to tap the huge energy potential in the manufacturing hub of Guangdong, where electricity supplies fall short of demand, analysts said.

"The agreement with Guangdong is a new starting point We will co-operate further to ensure stable, economical and clean energy supplies to the southern province," said Li Xiaopeng, president of Huaneng.

A Huaneng statement said the Yuedian deal would increase its capacity, optimize its assets allocation and boost market potential.

For Yuedian, the move reflects the local government's intention to diversify the share struacture of its State-owned companies, and will speed up the development of Yuedian, according to the company statement.

Huaneng is still in the process of determining the asset value of its stake in Yuedian, and a price tag is yet to be decided, a company official said yesterday.

"We will take 24 per cent of its general business portfolio instead of focusing on particular sectors," the Huaneng official said.

By the end of 2005, Yuedian had as many as 60 subsidiaries, with business spanning over thermal power, hydro power, nuclear power, coal and transportation. Its total installed capacity reached 11.33 GW (gigawatts).

The Yuedian deal followed the purchase of power assets in southern Hainan Province and shares in North United Power Co Ltd based in North China's Inner Mongolia Autonomous Region.

Huaneng became the largest shareholder in North United in June last year by increasing its stake from 20 per cent to 51 per cent.

The Beijing-based power giant said these moves marked a significant step towards its long-term goal of becoming a globally competitive energy conglomerate that focuses on the domestic power business.

Huaneng Group, the parent company of Hong Kong-listed Huaneng Power International, runs power stations in 23 provinces and cities with a total installed capacity of 43.21 GW at the end of 2005, or about 9 per cent of the country's total at that time.

It has set an ambitious target to almost double the capacity to 80 GW by 2010. The figure will account for more than 10 per cent of the country's total expected power generation capacity by then, according to industry statistics.

The power shortages that have plagued most of China over the past years will be substantially eased this year and the next as new plants ordered by the big power firms begin operation, said Wang Yonggan, secretary-general of the China Electricity Council.