Energy

Yangtze Power may buy into EuroSibEnergo

By Wang Ying, Fox Hu and Yuriy Humber (China Daily)
Updated: 2010-12-01 13:43

China Yangtze Power Co is in talks to buy a stake in OAO EuroSibEnergo as a key investor for the Russian utility's planned IPO in Hong Kong. [Photo/China Daily]

BEIJING - China Yangtze Power Co, the nation's biggest hydro-dam operator, is in talks to buy a stake in OAO EuroSibEnergo as a key investor for the Russian utility's planned initial share sale in Hong Kong, said three people familiar with the matter.

The investment requires approval from the Chinese government, the people said, declining to be identified as the talks are private. EuroSibEnergo has delayed its offering until 2011 because of the discussions, according to the people. The companies are still negotiating on the price, one of them said.

Chinese utilities are cooperating with neighboring countries including Myanmar on power projects that will help supply the world's fastest-growing major economy. EuroSibEnergo said on Monday it is forming a venture with China Yangtze, whose output more than doubled in the first nine months, to develop generators in Siberia and the Russian Far East.

"China Yangtze is looking abroad to diversify its portfolio," said Cheng Jianguo, an analyst with Guoyuan Securities Co. "Potential hydro resources outside China, including Russia and some southern Asian countries, will be able to supplement its domestic projects and maintain the company's growth."

China is undertaking a study with Myanmar and Thailand on a 7,000-megawatt hydro-dam on the Salween River, the Chinese government said on Nov 16. EuroSibEnergo and China Yangtze are planning 10,000 megawatts of generation capacity, some of which will be exported to China, according to the Russian company.

EuroSibEnergo, controlled by Oleg Deripaska, is seeking $1.5 billion in a Hong Kong IPO, adding to the $2.2 billion raised by the billionaire's United Co Rusal in a share sale in January.

Related readings:  China Three Gorges buys more into China Yangtze Power  Yangtze Power shares go on roller coaster ride at bourses

Aluminum maker Rusal, whose listing was the first by a Russian company in Hong Kong, has since dropped 11 percent.

Andrei Petrushin, a spokesman at EN+ Group, Deripaska's holding company for EuroSibEnergo and his 48 percent stake in Rusal, declined to comment. Lou Jian, China Yangtze's secretary, couldn't immediately be reached by telephone.

China Yangtze has fallen 16 percent in Shanghai trading this year, compared with the 15 percent decline in the benchmark Composite Index. The stock was down 1.56 percent at 7.57 yuan ($1.14) on Tuesday.

Companies in Hong Kong, Asia's third-biggest stock market, have raised a record $49 billion from IPOs this year as investors seek to benefit from growth in the region, according to data compiled by Bloomberg that include overallotment shares.

Proceeds from the EuroSibEnergo share sale will help repay debt, buy assets and add capacity, a person familiar with the plans said in August.

Bloomberg News