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Huaneng Renewables Shares Drop in Hong Kong Trading Debut

Huaneng Renewables Corp., the wind-energy unit of China’s biggest power producer, fell 2.8 percent on its first trading day in Hong Kong as investors sold wind-power stocks amid reports the government will halt subsidies.

The shares, after slumping as much as 11 percent from the HK$2.50 offer price, closed at HK$2.43 as the benchmark Hang Seng Index fell 0.8 percent. Huaneng Renewables raised HK$6.23 billion ($800 million) in the nation’s second-biggest clean-energy share sale this year. Three phone calls to the Beijing-based company’s investor relations department weren’t answered.

“The timing isn’t good,” Peng Lin, a Beijing-based analyst at BOCOM International Holdings Co., said today by phone. “Investor concern over the market outlook is driving the shares down.” Huaneng will rebound in a few days, Peng said.

Wind-power stocks declined this week after the U.S. Trade Representative said China agreed to end subsidies to makers of wind-turbine components, which could raise costs for developers. China’s Special Fund for Wind Power Manufacturing illegally required aid recipients to use Chinese-made parts, according to a U.S. complaint in December with the World Trade Organization.

The China Huaneng Group Corp. unit sold 2.49 billion shares, near the middle of the range marketed to investors earlier this month. The company scrapped an earlier listing plan because of unexpected and excessive market volatility, the company said on Dec. 13.

Windmill Target

China’s target of 110 gigawatts of installed wind capacity by 2015 has spurred expansion in the world’s biggest market for the alternative-energy source. The nation added 17 gigawatts of wind capacity in 2010, about 67 percent more than a year earlier, bringing its total to 42.5 gigawatts, according to New Energy Finance.

Sinovel Wind Group Co., the country’s biggest maker of wind turbines, raised 9.5 billion yuan ($1.5 billion) in an initial public offering in January. The stock has fallen 8 percent this week and 38 percent since the IPO.

China Datang Corp. Renewable Power Co., the wind unit of China Datang Corp., the nation’s second-largest power producer, raised HK$5.3 billion in an initial public offering in December, selling shares at HK$2.33 each. The stock traded at HK$2.01 today after declining 7.4 percent this week.

Turbine Quality

“Wind projects have become more attractive recently, especially in the face of the rising cost of coal power in China,” Justin Wu, the wind manager of Bloomberg New Energy Finance, said in an e-mail. “However, grid curtailment and the turbine quality of domestic suppliers continue to remain serious concerns.” More than 90 percent of Huaneng’s projects use domestic turbines, the most of any large Chinese wind developer, Wu said.

China Investment Corp., Temasek Holdings Pte and General Electric Co. are among key investors who agreed to buy a combined $415 million of stock in Huaneng Renewables’ IPO, the prospectus shows. The Chinese sovereign wealth fund subscribed for $60 million of shares, while Temasek, Singapore’s state investment company, agreed to invest $50 million.

Huaneng Renewables plans to increase its installed wind capacity by 45 percent to about 5.1 gigawatts this year, with most projects located in Liaoning, Inner Mongolia and Shandong provinces. At the end of last year it set a target of 73.5 gigawatts of projects, without saying when it expected to reach that goal.

The company is also developing solar farms to diversify. It has agreements to develop 1.74 gigawatts of solar projects, mainly in Shaanxi, Inner Mongolia and Hebei provinces.

Huaneng may benefit from lower wind-turbine prices, which declined about 5 percent in the first quarter from the previous three months to an average of 3,797 yuan a kilowatt, according to New Energy Finance.

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