China Resources Power Holdings Co, the third-largest Hong Kong-listed Chinese electricity producer, bought six power plants in the eastern province of Jiangsu as it seeks to increase output capacity by more than two-thirds.
The 2.5 billion yuan (US$359 million) acquisition of China Resources Power (Jiangsu) Investment Co adds 1,965 megawatts of capacity, with a further 840 megawatts under construction, the utility said in a statement to the stock exchange late Tuesday.
China Resources Power plans to expand capacity by 68 percent to 21,000 megawatts by 2010, its chief financial officer Wang Xiaobin said in March. Jiangsu Province's economic growth rate and the pace of gains in electricity demand make the region attractive for investment, the company said.
"Although China Resources Power trades at a premium valuation to peers, we still rate the stock a 'Buy' given its prospective acquisition upside and resilient earnings outlook," Michael Tong, a Hong Kong-based analyst at Deutsche Bank AG wrote, in a research note yesterday. "The company's lowest coal price hike guidance for 2008 demonstrates superior cost-control abilities."
China Resources Power trades at 23 times earnings, compared with 10 times for bigger rival Huaneng Power International Inc and 12 times at Huadian Power International Corp. The utility will cap unit fuel cost rise at 7 percent this year, President Wang Shuaiting said in March.
China Resources Power rose 5.26 percent to HK$20 in Hong Kong trading. Other Chinese power producers listed in Hong Kong including Huaneng and Huadian fell, Bloomberg News said.
China Resources bought 60 percent of Jiangsu Investment from China Resources Co and the balance from Jiangsu Kunlun Investment Co, it said.
Chinese power firms are raising output in order to meet demand from car makers, factories and petrochemical plants in the country.
(Shanghai Daily May 22, 2008)
