(February 6, 2006) Hong Kong-listed Huaneng Power International, the mainland’s largest independent power producer, has committed to the Three Gorges project.

Hong Kong-listed Huaneng Power International, the mainland’s largest independent power producer, has committed to the Three Gorges hydroelectric project. Company spokeswoman Zhao Lin said yesterday Huaneng signed a memorandum of understanding (MOU) with China Yangtze Three Gorges Project Development last week. The MOU will bring the two parties together to set up China Three Gorges Electric Power, a vehicle to be floated on the mainland’s stock market and ultimately in Hong Kong. ‘We have signed the MOU, but details of co-operation such as our stake size and investment size will be discussed,’ Ms Lin said. Huaneng will become the first overseas-listed founding shareholder of Three Gorges, the world’s largest hydroelectric project being built at a cost of 180 billion yuan (about HK$168.6 billion). In February, China Yangtze visited Hong Kong blue chips CLP Holdings and Citic Pacific to try to entice them to become founding shareholders. China Yangtze said at the time that it aimed to have China Three Gorges Electric Power set up in June and to have it issue A shares next year when the first of the project’s power-generating units begin operating. It said it was also aiming to raise one billion yuan from the founding shareholders and another five billion to six billion yuan in listings proceeds. The main assets of China Three Gorges Electric Power will include the Yangtze’s Gezhouba power plant. The plant has between six billion and seven billion yuan in assets and annual capacity of 17.5 billion kilowatt hours. CLP said previously it was studying the feasibility of taking part in China Three Gorges Electric Power. However, many analysts did not believe CLP would participate due to a projected unattractive investment return. HSBC Securities analyst Ivan Lee said: ‘There have been uncertainties over the return of the project. ‘I reckon this project’s return on equity may be about 10 per cent or even lower, and this is way below the 15 per cent or above that CLP required.’ He said the projected return was lower than an international standard of 14 per cent.

South China Morning Post, February 6, 2006