HONG Kong-listed China Resources Power Holdings Co said it will buy a stake in a power plant in northern Hebei Province for 530 million yuan (US$69 million) as it expands.
China Resources will buy 44.7 percent in Xingtai Power Generation Ltd from Hebei Electric Power Corp, a subsidiary of State Gird Corp of China, it said in a stock exchange filing late on Monday.
The deal is part of a public tender organized by the State Electricity Regulatory Commission that ended last month, in which State Grid raised 18.7 billion yuan by selling its stakes in 38 power firms as part of a restructuring.
State Grid, the larger of China's two power distribution firms, was given control of the generating capacity of 10.8 gigawatts in 2002 during the break-up of former monopoly State Power Corp into five national power generating firms and two grid operators. The assets were intended to be sold to help State Grid shed unnecessary supporting businesses.
China Resources said its earnings and cash flow can be enhanced with immediate contribution from the acquisition target. Xingtai operates six 220 megawatt coal-fired generation units and had an after-tax profit of 93.3 million yuan last year, against 18 million yuan in 2005.
"The acquisition price, we believe, is reasonable," CSC Securities analyst Sunny Chan wrote in a note, adding the price was equivalent to 1.07 times of Xingtai's attributable net asset value or 11.8 times of attributable earnings in 2006.
China Resources said last week it had won the right to acquire a 45 percent in Yangzhou No. 2 Power Plant Co in Jiangsu Province for 1.81 billion yuan from State Grid, also part of the tender.
To separate power generation business from grid operations is a global common practice as an all-in-one mode could lead to unfair competition in which power generated in the grid-owned stations may gain preferential access to networks.