Goldwind's revived IPO breezes through the first day

The Chinese wind turbine maker's IPO of up to $917 million is fully subscribed on the first day of bookbuilding.

After waiting three months for market conditions to improve, Xinjiang Goldwind Science & Technology, returned to the primary market yesterday with a reduced target amount and a lower offering price. The Chinese manufacturer of wind turbines now aims to raise up to HK$7.1 billion ($917 million) in its Hong Kong IPO, which is 23.5% lower than its initial target in June.

However, the reduced price range was viewed as attractive by institutional investors and the deal was fully covered yesterday -- the first day of bookbuilding -- by high-quality accounts, mostly long-only funds, sources said.

The positive response is supported by five cornerstone investors that have agreed to subscribe to a combined $190 million worth of shares in Goldwind. IFC, a green-energy unit of the World Bank, will order $75 million worth of shares; Chow Tai Fook, which is owned by Hong Kong tycoon Cheng Yu-tung, will subscribe to $40 million worth of shares; Shanghai Industrial Financial Holdings will invest $30 million; venture-capital firm VantagePoint Venture Partners $25 million; and insurance company PICC will take up $20 million worth of shares.

Recent major IPOs by Chinese renewable energy companies have received decent demand. Trony Solar, a Chinese solar power company which kicked off the bookbuilding last week for an up to $223 million IPO in Hong Kong, saw its offering fully subscribed on the first day. And China Ming Yang Wind Power, another Chinese wind turbine manufacturer, was also completely covered on the first day of bookbuilding. The company hopes to raise up to $400 million from an IPO on the New York Stock Exchange.

Coal, the most traditional, yet most polluted source of fuel, currently sustains 80% of China's energy need. To reduce emissions, the Chinese government plans to spend $736 billion over the next decade to make the most of wind, solar, nuclear and other clean energy technology.

The green-energy frenzy is likely to encourage China Huaneng Group and Datang Corporation, the country’s top power producers, to spin off their renewable energy units and list them in Hong Kong in the near future, one source said.

Goldwind, which is already listed in Shenzhen, is offering 395.3 million new shares at a price between HK$15.98 and HK$17.98 per share. That indicates the company could raise between HK$6.32 billion and HK$7.1 billion.

The price range represents a discount of around 20% to 30% to Goldwind's A-share price, and translates into 12.1 times to 13.6 times the company's projected earnings for 2011.

Based on this year's net profit, the price range would value the company at a price-to-earnings ratio between 15 and 16.9 times. That is a significant discount versus Chinese turbine maker Dongfang Electric, which is currently quoted at 28 times its estimated earnings for 2010.

The deal comes with a 15% greenshoe option that could increase the deal size to as much as $1.05 billion by adding a further 59.29 million shares.

The final price will be fixed on October 2 and the trading debut is expected for October 8. China International Capital Corp, Citi, Goldman Sachs, Haitong Securities and J.P. Morgan are arranging the deal.

The Urumqi, Xinjiang-based company planned to raise up to $1.2 billion in a Hong Kong IPO in June this year, but it shelved the plan, citing the "recent unexpected and excessive market volatility".

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