If you were to extrapolate an M&A trend for 2003 from the first weeks of the year, then it would probably be the shuffling of the decks in the Chinese power generation sector.
In the most recent deal, New York-listed Huaneng Power International is taking a 25% stake in Shenzhen Energy Group. This follows close on the heels of Mirant's sale of its 33% stake in the Shajiao C power staton to China Resources.
Both deals are notably in China's electricity-hungry industrial heartland, the Pearl river delta - which is patently where power usage is growing at a rapid clip.
Huaneng is buying into a company that owns 75% of the power capacity of Shenzhen municipality - the fast growing city bordering Hong Kong. The company also has plants in other parts of Guangdong province and by August this year will have total installed capacity of 3,809MW via six plants (including a controlling stake in Shajiao C).
Huaneng is paying Rmb2.39 billion ($289 million) for the stake, which equates to around $2.99 per watt. This compares to the $2.2 per watt pricing of the Mirant deal - although it should be remembered that Mirant was a distressed seller and had less bargaining power.
Meanwhile, the owner of this asset - and which will still control 75% - is the Shenzhen municipal government. It will take some of Huaneng's cash for budgetary purposes, with just under half of the proceeds representing new cash that will allow the company to expand across the rest of Southern China.
The company generates annual profit of around Rmb900 million and is clearly one of the jewels in the Chinese power sector. The acquisition of the stake therefore only confirms the increasing influence of former Chinese premier, Li Peng's family in the power sector. Huaneng Power is run by his son, Li Xiaopeng.
Deutsche Bank advised Huaneng Power on the transaction and UBS Warburg advised Shenzhen Energy Group.