Chinese power sector consolidates

China's Huaneng Power International Inc (HPI) will take over Shandong Huaneng Power Development Co. Ltd. (SHP) for $700 million, the companies said Tuesday. HPI Chairman Li Xiaopeng said the merger will further consolidate its position as the largest independent power producer in Asia, with 10,813 Mw of installed capacity and approximately 5,520 Mw under construction and development.


China's Huaneng Power International Inc (HPI) will take over Shandong Huaneng Power Development Co Ltd (SHP) for $700 million, the companies said Tuesday. Once the merger is complete, Shandong Huaneng would cease to exist and be delisted from the New York Stock Exchange.

Huaneng Power Chairman Li Xiaopeng said in the statement the merger would strengthen his company by giving it a greater geographic market. He said HPI will further consolidate its position as the largest independent power producer in Asia, with 10,813 Mw of installed capacity and approximately 5,520 Mw under construction and development.

The addition of SHP's power plants further strengthens HPI's portfolio of strategically located assets, allowing HPI to provide more extensive coverage to China's coastal regions, including Liaoning, Hebei, Shandong, Jiangsu, Fujian, and Guangdong provinces and Shanghai municipality, he explained. The regions are among the country's most important in terms of economic development.

The companies said the all-cash consideration takes into account the cash reserves of both companies and future cash flow, capital expenditures plan, and capital structure of the combined entity.

The unaudited pro forma 1999 earnings per share for the combined entity is 0.45 yuan/share, 36.4% higher than HPI's reported 1999 0.33 yuan/share. In arriving at the transaction price, the companies said they considered the interests of all shareholder groups.

The merger is subject to, among other things, the approvals of the respective shareholders of HPI and SHP, Chinese and US regulatory authorities, and the Stock Exchange of Hong Kong Ltd. The transaction is expected to be completed by yearend.

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