Huaneng Power says a new share issue is expected to increase its market share and reduce debt.[China Daily]
Huaneng Power International Inc, the listed arm of the country's largest domestic electricity corporation, said yesterday it plans to raise 8.55 billion yuan in a private share placement to fund new energy projects and reduce debt.
The company's stock surged as high as 5.3 percent to 8.28 yuan in yesterday morning's session before ending up at 8.02 yuan on a 2.04 percent gain.
The power generator said in a statement to the Shanghai Stock Exchange yesterday that it plans to sell as many as 1.2 billion A shares for a minimum of 7.13 yuan each.
Huaneng Power also plans to issue 400 million new H shares to China Huaneng Hong Kong, a wholly owned subsidiary of State-owned Huaneng Group, to expand its business overseas.
The company said the new share issue is expected to increase its market share, improve production efficiency and promote sustainable development.
The move comes after Huaneng Power's announcement on Jan 5 to spend 8.63 billion yuan to purchase nine assets owned by Shandong Power to consolidate its market presence in Shandong and Yunnan provinces.
Guosen Securities, however, said given the small scale of the total installed capacity of the new investment - 3.95 million kW - the company's new issuance will not have a dramatic impact on the company's earnings in 2010 and 2011.
To date, Huaneng's total installed capacity is approximately 44 million kW.
"Since raised capital has been mainly used to purchase fossil-fuel and wind-power plants - the latter of which has made limited contribution to the company's profits - the capital raising effort will not add much credit to their earnings," said Liu Bo, an analyst at First Capital based in Shenzhen.
Liu said he will maintain the company's rating at "neutral" by setting its earnings per share target at 0.4 yuan in 2010, on the condition coal prices - a key raw material for Huaneng Power - rise 10 percent this year.
Huaneng Power reported a net third quarter profit of 2.17 billion yuan in 2009, a 261 percent year-on-year increase.
At the same time, its earnings per share were 0.18 yuan, with debt of 141.25 billion yuan.
The company said reducing debt was one of the main reasons for selling shares.
