Boost to Yangtze Power on assets buy

By Fu Chenghao  |   2009-5-19  |     NEWSPAPER EDITION

SHARES of China Yangtze Power Co gained yesterday as trading resumed after the company said it would pay its parent 107.5 billion yuan (US$15.7 billion) for power generation assets.

The operator of the world's biggest hydropower project, the Three Gorges Dam, said over the weekend that it would acquire the remaining 18 generating units it doesn't own at the project.

Yangtze Power rose 4.11 percent to 14.94 yuan yesterday after surging 10 percent in early trade. Pending the restructuring plan, its shares had been suspended from trading for more than a year, during which the Shanghai Composite Index dropped more than a quarter.

The company will issue 1.55 billion shares at 12.89 yuan apiece to its parent, China Three Gorges Project Corp, raising 20 billion yuan, and pay 37.5 billion yuan in cash to fund the purchase. It will also assume 50 billion yuan of its parent's debt.

Yangtze Power already owns eight generators of the Three Gorges Dam project, whose 26 units have combined capacity of 18,200 megawatts, or 700MW each. The transaction will boost Yangtze Power's attributable generating capacity by 151 percent to about 21,000MW from 8,377MW at the end of last year.

"The deal helps Yangtze Power to expand its core hydropower business quickly, and increases its profitability and risk management capability," the company said.

Assuming the deal is completed by the end of next month, Yangtze Power forecast its net profit could swell 60.3 percent to 6.3 billion yuan this year.

China International Capital Corp analyst Chen Junhua said that Yangtze Power would be entering a period of stable operation after the deal.