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Huaneng Power International – China’s largest independent electricity producer, run by the son of Three Gorges dam enthusiast Li Peng – has been quick to enlist in the new campaign to shore up the costly and financially troubled project on the Yangtze River.

Facing huge bills this year to cover resettlement and construction costs, the Three Gorges Project Development Corp. recently announced plans to raise 5 billion yuan RMB (US$600 million) through an initial public offering on the domestic stock market. The corporation said last month it would set up a new energy giant called China Three Gorges Power Corp. by the end of this year, before listing its shares on Shanghai’s A market next year.

Events have marched swiftly on, and China Three Gorges Power was officially launched at a ceremony on April 3. The date was full of significance: Ten years earlier to the day, the National People’s Congress, China’s parliament, had approved the Three Gorges project. Li Peng, current chairman of the NPC, was premier at the time and the dam’s staunchest champion within the top Chinese leadership.

While potential investors have generally been hesitant, questioning whether the capital-intensive Three Gorges project could yield commercial rates of return, Huaneng has leapt on board, signing a co-operation memo with the new power entity at the moment of its birth.

"Huaneng will never abandon the Three Gorges Project Development Corp., which is an excellent partner," Huaneng Power International chairman Li Xiaopeng was quoted as saying at the launch ceremony. "We will take part in investment and dam construction." In his own comments, Li Yongan, vice-manager of the Three Gorges Project Development Corp., acknowledged Huaneng’s "great support."

In its April 5 report on the ceremony, the Three Gorges Project Daily noted that this will be the first investment in a large-scale hydroelectric project for Huaneng, which until now has concentrated on the construction and operation of big thermal power plants. The company announced operating revenue of close to US$2 billion last year, and profits of US$417 million (up 37 per cent over the previous year).

Analysts quoted by the South China Morning Post said Huaneng is interested in the Three Gorges project because it wants "to avoid head-on competition from the huge supply of hydro power to the coastal regions where Huaneng’s main market lies."

Lu Youmei, general manager of the Three Gorges Project Development Corp., told a news conference last month that at least five investors were being sought to be founding shareholders of China Three Gorges Power. In addition to Huaneng, Mr. Lu said other interested parties included Hong Kong power utility CLP Holdings, China Development Bank, and China International Trust and Investment Corp.

A CLP spokesperson quoted last month in the South China Morning Post said representatives of the Three Gorges project had approached the company with a proposal, "but we haven’t made any decision yet." Huaneng Power International vice-chairman Wang Xiaosong, meanwhile, sounded considerably more enthusiastic: "We’re interested in it very much. We want to be one of the founding shareholders."

For years, charges of corruption and nepotism have dogged Li Peng’s family, with several members reported to be deeply involved in the deregulation and privatization of China’s power sector. Huaneng Power International chairman Li Xiaopeng (literally "Li Little Peng") is Li Peng’s eldest son. Li Peng’s daughter, Li Xiaolin, is a vice-president of the country’s largest power-generating company, China Power Investment Corp.

Late last year, a publication aimed at China’s growing number of stock-market investors ran afoul of the Communist Party leadership when it published an article alleging that Huaneng, which is still supposed to be mainly state-owned, had essentially become "a Li family business."

Writing in the Nov. 24 issue of Securities Market Weekly, author Ma Linhai maintained that only the "Li clan’s connections" could explain why Beijing had allowed Huaneng to list on the New York, Hong Kong and Shanghai stock exchanges. Under the headline "Mysterious Huaneng International," Mr. Ma (who was identified as being an officer in the People’s Armed Police) wrote that the company was "like a ship," with Li Xiaopeng at the tiller and his mother, Zhu Lin, acting as captain. Mr. Ma claimed that Ms. Zhu is chairman of Huaneng International Power Development Corp., a parent company of Huaneng Power International.

The magazine quickly published an apology in its Dec. 1 issue, calling the article a mistake. It said Ms. Zhu in fact held no position at Huaneng International Power Development Corp. (It is known, however, that while her husband was premier, she did run the Beijing office of the Guangdong Daya Bay nuclear power plant.) The Washington Post reported that party leaders, apparently determined to remove all traces of the story, not only sought to confiscate all copies of the magazine with the offending article, but also all copies of the subsequent issue containing the apology.

Washington Post Beijing correspondent John Pomfret went on to write that although Li Xiaopeng "clearly cashed in on his connections" when he became chairman of Huaneng Power International in early 2000, he "also has a reputation as a straight-talking professional executive. Russell Young, an analyst with Nomura Securities, said the younger Li has done a good job of steering the firm onto the New York and Hong Kong markets. … ‘Huaneng is poised to become one of the five or six big electricity generators in China,’ said Young, ‘and that’s not just by luck or connections.’"

Despite the speedy retraction by Securities Market Weekly, the appearance of Mr. Ma’s unflattering article in China’s tightly controlled media has led to speculation that a party reshuffle later this year, expected to include Li Peng’s retirement, could also see the downfall of his family.

However, Inter Press Service correspondent Antoaneta Bezlova has written that some observers believe Li Peng would not agree to step down from his post without first securing guarantees about his family’s well-being. She quotes a Chinese source as saying: "This is a deal brokered by [late party leader] Deng Xiaoping and [President] Jiang Zemin years ago when Jiang assumed power. Li Peng and his family should remain safe."