China Datang Corp. Renewable Power Co. raised the minimum $643 million sought in a Hong Kong initial public offering and rival Huaneng Renewables Corp. scrapped its sale, amid concern the Chinese economy will slow.
Datang Renewable, China’s second-biggest wind-power producer by capacity, sold 2.14 billion shares at HK$2.33 (30 cents) apiece, after offering them at HK$2.33 to HK$3.18 each, according to two people with knowledge of the IPO, declining to be identified before an announcement.
Hong Kong’s benchmark Hang Seng index has fallen 6.6 percent since reaching a year-high on Nov. 8 on concerns China will take more measures to cool the world’s fastest-growing major economy and rein in inflation. Investors in Chinese wind- power producers China Longyuan Power Group Corp. and Xinjiang Goldwind Science & Technology Co. have lost almost 10 percent since they sold stock in Hong Kong in the past year.
“Wind power is seen as being too reliant on support from China’s government,” said Francis Lun, general manager at Fulbright Securities Ltd. in Hong Kong. “I don’t think there’s much appetite for wind power companies in Hong Kong.”
Huaneng Renewables, a unit of China Huaneng Group Corp., scrapped its IPO because of unexpected and excessive market volatility, the company said in a statement to the Hong Kong stock exchange today. Huaneng Renewables didn’t want to price its shares at the bottom of a range offered to investors, two people with knowledge of the transaction said. The company was seeking as much as $1.3 billion as it offered shares from HK$2.98 to HK$3.98 apiece.
Datang International Power Generation Co. and Huaneng Power International Inc., Hong Kong-listed units of China’s two largest electricity producers, fell today. Datang International dropped 0.7 percent as of 2:32 p.m. local time and Huaneng Power declined 1.2 percent. The Hang Seng index rose 0.7 percent.
Datang Renewable is seeking to post a profit of at least 405 million yuan ($61 million) this year, compared with 366.9 million yuan in 2009, the IPO prospectus shows. The Datang shares were sold at 13.1 times price-to-earnings estimates for 2011. Longyuan Power has dropped 9.9 percent from its IPO price last December, and is now trading at about 18.6 times for 2011, according to data compiled by Bloomberg. Xinjiang Goldwind has declined 8.5 percent since its share sale price on Oct. 8, and trades at 13.14 times for the same period.
Hong Kong’s stock market decline led Bluestar Adisseo Nutrition Group and China Auto Systems Technologies Ltd. to postpone IPOs in the city in the past month.
“There are so many companies coming to the market now looking for money that investors can be very choosy,” said Fulbright’s Lun. “If I were considering an IPO, I would wait a while for sentiment to improve.”
The proceeds of Datang Renewable’s share sale will be used to expand its wind-power generating capacity and pay bank loans, the prospectus shows. China Everbright Ltd., UBS AG, Credit Suisse Group AG, JPMorgan Chase & Co. and Macquarie Group Ltd. are managing the sale.
Seven key investors have agreed to pay a total of $260 million for shares in the unit of China Datang Corp., according to the prospectus. China Power International Holding Ltd. will buy a $10 million stake, while Thomas Lau, brother of Hong Kong billionaire Joseph Lau, will take a $20 million share.
Datang Renewable’s wind-power capacity may rise to 4,000 megawatts by the year-end, and increase by about 2,000 megawatts annually in the next six years, President Hu Yongsheng said on Dec. 6.
China wants at least 15 percent of its energy to come from renewable sources including wind by 2020. The world’s biggest polluter erected more wind turbines in 2009 than any other country and may install a record 18,000 megawatts of wind-power capacity this year, Bloomberg New Energy Finance estimates show.