CPID has agreed to acquire 63% of Wu Ling Power for RMB4.47B (US$654M) from CPI Holding, a wholly-owned subsidiary of CPI Group. The deal is a connected transaction.
Strategic reasons for the acquisition include the leading importance of hydro power among renewable energy sources in China, said CPID. Hydro accounted for approximately 21.6% of the country’s total installed capacity and 16.4% of total electricity generation at the end of 2008.
CPID added that the move also gives a leading role in the hydro power sector in Hunan as well as bringing more balance to its generation portfolio. Wu Ling Power is the largest independent hydro producer in Hunan.
Wu Ling Power primarily develops hydro power projects in Hunan and Guizhou provinces. Upon completion of the transaction, Wu Ling Power will bring 2245MW of installed capacity to boost CPID’s portfolio by a quarter to almost 11.3GW. The deal includes 10 hydro plants and one coal plant, but not Qian Dong Power’s facility which is being sold separately.
The company wholly owns seven hydro plants and has majority ownership (95%) in three facilities, plus a minority stake in a coal plant, all of which gives it 3564MW of attributable installed capacity. With 63% ownership, CIPD obtains 2245MW of capacity from its majority holding of Wu Ling Power, which focuses on cascade development on the Yuan Jiang river.
The biggest hydro plants being transferred are 1200MW (5 x 240MW) Wu Qiang Xi, built in the mid 1990s in Hunan, and 1000MW (4 x 250MW) San Ban Xi in Guizhou, in which it holds a 95% stake and was finished in 2006.
Over 2006-8, Wu Ling Power’s annual gross hydro power output was 7409GWh, 10,903GWh and 10,730GWh, respectively. This equated to 44.3%, 52.2% and 49.8% of Hunan’s total centrally despatched hydro power generation.
Three hydro projects are under construction with combined installed capacity of 2450MW but the capacity attributable to Wu Ling Power is 2388MW. The plants are: the 1200MW (4 x 300MW) Hei Mi Feng pumped storage plant, due to be operational from later this year and wholly-owned by the company; the 420MW (3 x 140MW) Bai Shi project, to be finished in 2011 and 95% held by Wu Ling Power; and, the 830MW (4 x 200MW plus 2 x 15MW) Tuo Kou plant, to be finished in 2012 and 95% held by the company.
Wu Ling Power was incorporated in 1995 and 11 years later was registered as a sino-foreign JV with limited liability, owned by CPI Group and Hunan Xiangtou International Investment Ltd – itself a sino-foreign JV, owned equally by Meija Xiangtou Power Co Ltd and Hunan Xiangtou Holding (Group) Ltd.
A Memorandum of Understanding (MoU) for the deal was agreed in late May and the latest move comes from the parties signing an Acquisition Agreement. It is anticipated that the transation will be completed by late June and attached conditions by the end of 2010.
Financial adviser to the transaction was BOCI Asia Ltd.