State-Owned Firm Plans IPO to Fund Reactors; $5.4 Billion Deal Is Possible
Associated Press
A nuclear reactor under construction in Hainan province in December. China has 14 reactors in service.
The state-owned nuclear-power operator didn't give any other details about the timing or size of the offering on its statement posted Tuesday on the website of the Ministry of Environmental Protection, but analysts said such a deal could raise as much as $5.4 billion for the Chinese government. At that size, it would be China's biggest IPO since Agricultural Bank of China Ltd. raised $10.1 billion in Shanghai as part of its $22.1 billion dual listing in Hong Kong and Shanghai in July 2010, according to Dealogic.China suspended the construction of new reactors following the Fukushima nuclear disaster in Japan last year. However, the State Council, or cabinet, said last week that leaders had approved the country's 2020 nuclear-safety strategy and had completed inspection of existing nuclear reactors, a sign that approvals may soon resume.
China National Nuclear Power, according to a statement on the environmental ministry website, will sell shares to raise funds for nuclear-power projects in Fujian, Zhejiang, Hainan and Jiangsu provinces, the statement said, adding that these projects were approved by China's National Development and Reform Commission between 2008 and 2010. Those projects require 173.5 billion yuan in funding, it said. In a separate statement on the website, the ministry said China National Nuclear had passed its environmental tests, a necessary step before the company can file for a listing with the China Securities Regulatory Commission, the securities regulator.
Chinese laws require a minimum of 20% of equity for power projects, with the rest coming from loans, meaning China National Nuclear would need to raise $5.4 billion in equity to meet that level. But because the projects will be phased in over a number of years, the IPO might not raise that entire minimum amount, analysts say.
Even so, the IPO could be asking a lot of the country's equity markets. The commission hasn't approved any sizable IPOs since May, when the regulator gave the green light to China Postal Express & Logistics Co.'s potentially 9.98 billion yuan deal, though that has yet to launch. Since early May, the benchmark Shanghai Composite Index is down 4%.
"A big IPO would weigh on the stock market further as it would divert funds from the secondary market, especially when the sentiment remains fragile," said Yang Delong, a fund manager at China Southern Fund.
China is moving toward a big expansion of its nuclear sector. The country's long-term plans include the construction of as many as 100 reactors over the next two decades. While the government controls electricity prices—making it difficult to determine just how lucrative China's energy sector is—the country is clearly moving away from coal as a fuel source, a positive for companies like China National Nuclear Power that build nuclear-power plants. China's nuclear-power capacity could rise to between 60 gigawatts and 70 gigawatts by 2020, missing expectations of 80 gigawatts because of the suspension, local media has reported.
The country has 14 nuclear reactors in service, which together produce 11.8 gigawatts, and it plans to expand its nuclear-power generating capacity to 40 gigawatts by 2015.
China National Nuclear Power's state-owned parent, China National Nuclear Corp., has two listed subsidiaries already: Hong Kong-traded CNNC International Ltd., 2302.HK +5.05% which is involved in overseas uranium supply, and Shenzhen-listed Sufa Technology Industry Co., 000777.SZ -1.84% which makes valves for nuclear-power equipment.
Profit at parent China National Nuclear Corp. rose 16% in 2011 from a year earlier, it said on its website, without elaborating. Its target profit in 2012 is 7.5 billion yuan, according to the website.
LINK
No comments:
Post a Comment
This is an unmoderated blog. Please be professional and respectful as you post.