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China Longyuan Said to Seek Up to $2.3 Billion in Hong Kong IPO

Bloomberg, By Bei Hu and John Duce

November 22, 2009

— China Longyuan Power Group Corp., the nation’s biggest wind power producer, may raise as much as HK$17.5 billion ($2.3 billion) in a Hong Kong initial public offering, said three people familiar with its plan.

The renewable energy provider plans to sell 2.14 billion shares at HK$6.26 to HK$8.16 apiece, said the people who declined to be identified before an official announcement. The top end of the range values the Beijing-based company, which is selling a 30 percent stake in the IPO, at HK$58.3 billion or 28.9 times its 2010 earnings per share as estimated by banks involved in the sale, two of the people said.

Four so-called “cornerstone investors”, including companies linked to China Life Insurance Co., Bank of East Asia Ltd. Chairman David Li, Hong Kong-based asset manager Value Partners Group Ltd. and WL Ross & Co. LLC, have agreed to buy shares valued at about $300 million in the IPO, said the two people. Cornerstone investors are guaranteed shares in a Hong Kong IPO in exchange for a promise not to sell the stock for several months.

Morgan Stanley and UBS AG are managing the sale.

Stocks of companies such as China WindPower Group Ltd. and China Solar Energy Holdings Ltd. have more than doubled in Hong Kong trading this year as the mainland government encourages the use of renewable energy. The nation’s wind-power capacity will rise to 100,000 megawatts by 2020 from at least 20,000 megawatts next year, Zhang Guobao, head of the government’s National Energy Administration, said on May 26.

No. 5 in World

China Longyuan, a subsidiary of state-controlled electricity producer China Guodian Corp., is the nation’s first developer of wind farms and accounted for 24 percent of the nation’s wind-power capacity, according to a Nov. 6 Morgan Stanley report seen by Bloomberg.

Its installed capacity of 2.9 gigawatts ranked it the fifth-largest wind power producer globally, the report said, citing data from renewable energy consulting firm BTM Consult ApS.

Profit will likely rise 162 percent this year to 885 million yuan ($129.6 million) on increased capacity and electricity generation, the Morgan Stanley report said. Revenue may increase 14 percent to 7.2 billion yuan, it said.

Longyuan was capable of generating about 2,630 megawatts of wind power in 2008 and this will be raised to 6,000 megawatts by next year, Vice President Huang Qun said June 2. One thousand megawatts is enough electricity to power about a million homes.

Hong Kong IPOs

Thirty-eight IPOs in Hong Kong in the first 10 months of the year raised a combined HK$107 billion, a survey by the accounting firm Ernst & Young LLP said Nov. 10. That’s 62 percent more than capital raised last year, it said.

China, the world’s biggest producer of greenhouse gases, burns coal to produce 80 percent of its electricity and wants at least 15 percent of the nation’s energy to come from renewable sources by 2020.

A phone call to Longyuan’s Beijing headquarters late last night wasn’t answered. Noel Cheung, a Hong Kong-based spokeswoman at Morgan Stanley, and Mark Panday, a spokesman for UBS in the city, didn’t reply to e-mail enquiries late last night.

To contact the reporters on this story: John Duce in Hong Kong at Jduce1@bloomberg.netBei Hu in Hong Kong at

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