HNE hopes to raise around 30 billion yuan through the IPO, 21 billion yuan of which will be invested in wind power and solar power, while the rest will be used to supplement working capital.
Photo from CFP
By DAI Jingjing
Huadian New Energy Group (HNE), a subsidiary of one of the country’s five largest state-owned electricity generators, Huadian Corporation, had its A-share IPO application approved by the review committee of the China Securities Regulatory Commission (CSRC) on Thursday.
The company hopes to raise 30 billion yuan (US$4.5 billion) through the IPO, 21 billion yuan of which will be invested in wind and solar power, while the rest will be used to supplement working capital.
If successful, HNE will have the largest IPO in China’s new energy sector. Three Gorges Renewables Group’s IPO in 2021 on the main board of the Shanghai Stock Exchange raised 22.5 billion in 2021.
HNE, (previously Huadian Fuxin Energy) was founded in 2009. It went public in Hong Kong in 2012 but was delisted in 2020 when the parent company took advantage of a slumping market to buy back undervalued assets. In any case, Fuxin’s low transaction volume and depressed valuation had reduced its capacity to raise funds in the capital market.
Huadian took back its 62.8-percent share and reprivatized the unit, also acquiring 2. 7 billion shares from minority shareholders, along with 750 million unlisted stock in China.
HNE has a total installed capacity of 27.2 gigawatts of which, wind power accounts for only 20,000 MW, and solar power 6,700 MW, representing market shares of 6.05 percent and 3.26 percent respectively. According to its prospectus, the company’s net profit in 2020 was 4.1 billion yuan, which doubled to 8.5 billion yuan last year.
As of the end of 2022, HNE had total assets of 270 billion yuan, with a consolidated asset-liability ratio of 71.3 percent. Outstanding borrowings amounted to 167 billion yuan, up 49 billion yuan on the previous year-end.
China is aiming to peak in CO2 emissions before 2030 and shooting for carbon neutrality before 2060. The energy sector is the source of almost 90 percent of China’s emissions, putting energy policies at the heart of the country’s transition.
By accelerating its clean energy transition, China can secure major economic, innovation and employment benefits while helping the world move nearer to achieving shared climate goals. As China’s power companies race with each other to turn green, HNE has high fundraising demands to expand its wind power business but has so far found limited investors.
