Aug. 23 (Bloomberg) -- China Yangtze Power Co., operator of the world's biggest hydropower project, plans to sell as much as 8 billion yuan ($1.05 billion) of domestic bonds to pay bank loans and buy generators.

Shareholders will vote on the plan to sell the bonds with maturities of five to 10 years on Sept. 7, the Beijing-based company said in a statement to Shanghai's stock exchange today. The sale requires the approval of China's stock-market regulator.

The electricity producer is the first company to sell bonds since China's government issued rules in June, giving the China Securities Regulatory Commission the power to approve bond sales. Yangtze Power is increasing output by acquiring stakes in the parent company's plants.

Yangtze Power will issue the bonds within two years of getting approval from the share-market regulator, the company said in today's statement. The bonds will be sold in two phases, it said.

The shares in Shanghai fell 0.7 percent to 19 yuan at 10:39 a.m. The stock has gained by 97 percent this year, lagging behind the 148 percent increase in the city's benchmark CSI 300 Index.

The company agreed in May to buy 10 percent of Shanghai Electric Power Co. for 701 million yuan from state-owned Shanghai Huadong Electric Development Co. Shanghai Electric Power supplies a third of the Chinese city's electricity.

Parent's Assets

It also plans to buy two generators from parent China Three Gorges Corp. for 10.4 billion yuan, adding 1.4 million kilowatts of installed capacity, the company said May 15.

China Three Gorges is developing the Three Gorges Dam on the Yangtze, Asia's longest river. Yangtze Power was appointed by the parent as operator of all the project's turbines and has priority to buy the dam's generating units.

Yangtze Power's first-half net income climbed 72 percent to 2.26 billion yuan on output gains, the utility said July 31.

The utility had total capacity of 12.8 million kilowatts at the end of last year, according to its 2006 annual report.

Chinese power generators are expanding to gain from surging demand in an economy that grew by 11.9 percent in the second quarter, the fastest pace in 12 years.

To contact the reporter on this story: Jiang Jianguo in Shanghai at jjiang@bloomberg.netWinnie Zhu in Shanghai at wzhu4@bloomberg.net

Last Updated: August 22, 2007 23:01 EDT