Hubei Energy Group (000883), the largest power generation enterprise in Hubei province, plans to raise up to 3.25 billion yuan from a private placement of a maximum of 443.5 million shares at not less than 7.33 yuan per share, reports National Business Daily, citing a company filing.

The net amount to be raised will not exceed 3.19 billion yuan.

The second-largest shareholder, China Yangtze Power (600900) may subscribe to the private placement. Through the end of 2010, Yangtze Power had a 36.76 percent stake in Hubei Energy Group.

The private placement will help to improve the group’s financial status and lower its solvency risk. It had a debt-asset ratio of 67.25 percent as of end 2010.

Funds raised will be used on the construction of a wind farm and natural gas pipeline construction, and 957 million yuan will be used to replenish working capital.

The wind farm to be funded by the proceeds of the private placement is located at Qiyue Mountain.

To be built over two phases, the first phase will have capacity of 49.3 MW and will take 18 months to construct. The second phase has capacity of 49.5 MW and will take 15 months to build.

Upon completion, the first and second phases will generate on-grid power of 86.97 gWh and 88.28 gWh, respectively.

The four pipelines to be built will supply natural gas to Wuhan, Hongan county, Macheng city, Jiayu county, Chibi county, Shishou city, Gongan county, and Songzi county.

Hubei Energy Group sold 135 million cubic meters of natural gas in 2010 and had a nine percent market share in Hubei province. It aims to focus on ‘six plus one’ main businesses during the 12th Five-Year Plan period, including hydropower, thermal power, nuclear power, new energy, natural gas, coal and finance.

At the end of 12th Five-Year Plan period, the group expects to supply 13 percent of the province's primary energy consumption.

Shares of Hubei Energy Group were down 3.35 percent to trade at 8.10 yuan at 10:46 today.