(February 13, 2006) China will soon begin a drive to drum up financing from stock markets, despite expected protests. After the initial public offering in Shanghai, a listing in Hong Kong is likely and possibly in London as well.

China plans to resolve funding problems for its Rmb 180bn (Pounds 15bn) Three Gorges hydropower dam by offering shares on the domestic stock market and through a Hong Kong listing. It could also seek a listing in London to help fund the country’s biggest construction project since the Great Wall. The initial public offering of the China Three Gorges Power company on Shanghai’s A-share market is expected to raise Rmb 4bn-Rmb 5bn, said Li Yongan, deputy general manager of the Yantgze River Three Gorges Project Development, the company that oversees all aspects of the project. All of the 18,200MW generating capacity of the world’s biggest dam will eventually be injected into the listed company at a cost of about Rmb 100bn, making it potentially China’s largest listed company. Mr Li said the group was mulling aspects of its planned overseas listing. The main contenders for lead underwriters are Merrill Lynch, Morgan Stanley, Nomura and Goldman Sachs, all of which have drawn up plans. But the Three Gorges’ proposed listing may create turbulence. Non-governmental organisations oppose the project, which will require the mandatory resettlement of more than 1m people, as it may pollute China’s main waterway and increase the risk of earthquakes. Mr Li said Mirant, a US energy company, and CLP China Power, a Hong Kong company, have been in talks to take part of a 10 per cent tranche being offered in private placements to four strategic investors for the domestic listing. The other two will be mainland companies, Mr Li said. London’s stock market is being considered for an IPO as the country’s laws are similar to those in Hong Kong, and some of the Three Gorges project’s creditor banks are European. Don Cruickshank, chairman of the London Stock Exchange, flew to China this year to promote London as a destination for Chinese listings, most of which have gone to New York. To date, London has formally listed six Chinese companies, including power company Zhejiang Southeast Electric Power. However, there were doubts over whether the project, given its huge costs, would be able to yield a commercial return. There are also concerns that surrounding provinces and cities, which have their own power plants, may resist state orders to buy Three Gorges power.

Financial Times, February 13, 2006