CHINA has taken a key step forward in reforming its power industry when it completed the first-phase sale of electricity generation assets owned by grid operators to power firms.
Thirty-one power companies bought a combined generation capacity of 10.8 gigawatts for 18.7 billion yuan (US$2.45 billion) in the sale, 56 percent higher than the book value of these assets, the State Electricity Regulatory Commission said yesterday.
State Grid Corp of China, the bigger of the nation's two electricity distributors, retained the 9.2 gw of generation it got in 2002 as the former State Power Corp was broken into five generation groups and two grid units to fund the restructuring of the industry. The capacity grew to 10.8 gw by the end of June last year, the commission said.
"The money raised will be used to finance the reform of separating non-core supporting operations in the grid operator," the regulator said. "This serves to dispose state power assets by using the market."
To separate power generation and distribution business is a common global practice because an all-in-one mode could spark unfair competition in that grid-controlled power generation may enjoy preferential access to the distribution network.
Among the deals, China Yangtze Power Co and China Power Investment Corp agreed to acquire a combined 18.9 percent stake in Shanghai Electric Power Co for 1.3 billion yuan, Shanghai Electric said in a statement to the Shanghai Stock Exchange.
China Resources Power Holdings Co told the Hong Kong stock exchange that it agreed to buy 30 percent in Yangzhou No. 2 Power Plant Co from Jiangsu Electric Power Co for 1.2 billion yuan and 15 percent in East China Grid Co for 602 million yuan.
Preparations to auction another 6.47 gw of capacity owned by State Grid have already started and the revenue will be used to finance its network expansion and upgrades. China Southern Power Grid Co, the smaller of the two, has also been granted 2.19 gw during the 2002 restructuring.
Other reform measures for the power sector include the creation of an electricity trading market and the revamp of tariffs, according to the state plan.