Meiya Power raises $227m in HK IPO

The power unit of China's largest producer of nuclear energy has successfully floated its shares. Retail demand was particularly strong.

Meiya Power, a unit of China General Nuclear Power Corp, has raised $227 million in its Hong Kong initial public offering.

Allocations were still being finalised Thursday afternoon, but sources close to the deal said that both retail and institutional tranches were well oversubscribed. The issuer priced 1.03 billion shares, all primary, at HK$1.71 per unit, towards the top of the initial HK$1.57 to HK$1.73 per share range.

Demand from Hong Kong retail investors was particularly robust, with this tranche oversubscribed by nearly 500 times, one source told FinanceAsia. In total, these investors received 103 million shares. Sources note that the institutional tranche was also multiple times oversubscribed. The strong uptake will almost certainly warrant the issuer exercising the clawback, which will add an additional 15% to the base-deal.

Meiya Power, which focuses on non-nuclear clean energy and renewable energy, locked in a number of cornerstone investors during the roadshow. China Southern Power Grid, hedge fund Value Partners, retailer Chow Tai Fook, Guangdong state run asset management company Hengjian Investment, and China Cinda Asset Management pledged a combined $84 million to the power producer.

At HK$1.71 per share, Meiya Power is trading on a blended syndicate forecast of 8.1 times its 2015 earnings, in the middle of its peers. Its market cap is around $900 million.

Founded in 1995, Meiya Power operates coal-fired power, wind power and hydro power plants in China primarily, but also has operations in South Korea.

Described as a mix between clean energy and dirty energy with operations in both China and Korea, the company does not have any direct comparables, although sources say some of the traditional power names could be seen as peers, such as Huadian Power International and China Resources Power Holdings.

Huadian Power International is currently trading at 7.21 times its 2014 earnings, a discount to Meiya Power. China Resources on the other hand is now trading at a premium to Meiya at 9 times its 2014 earnings, according to Bloomberg.

As state-owned enterprises, both have enjoyed strong years in terms of performance. Huadian Power shares are up 92% so far this year up to September 25, while China Resources is up 26% year-to-date. China Resources may come under pressure soon however, given its president Wang Yujun resigned earlier this week and is now being detained on suspected corruption and bribery, according to a statement on the Hong Kong Exchange website.  

Proceeds, revenues
The company claims to be well-placed to expand its portfolio of clean and renewable energy projects in China as the country shifts from fossil fuels to non-fossil fuels. Beijing has a number of clean initiatives, and intends to boost non-fossil fuel usage to 11.4% in 2015 and 15% in 2020 from 8.6% in 2010, the company said in its prospectus. This could support companies such as Meiya Power, which has 23 wind generation projects, three hydro power projects and five solar power generation projects under construction.

In addition to boosting its presence in China, the company aims to expand in Southeast Asia, and is mulling Thailand, Indonesia and Vietnam.

Revenues have increased year-on-year, totalling $1.03 billion in 2013, compared with $932.4 million in 2012 and $754.7 million in 2011. The company also reported a 4% increase in revenues to $311.2 million in the first four months of the year, compared to $299.5 million in the first four months of 2013.

Annual profits have also increased to $69.6 million in 2013, up from $38.4 million in 2012 and $19.4 million in 2011.

But in the first four months of 2014, profits plunged 25% to $21.5 million in from $28.6 million in the same prior-year period.

Morgan Stanley led the deal, while JP Morgan, Guotai Junan International, BOC International, HSBC and ICBC handled joint global coordinating responsibilities. It is the issuer’s third attempt to come to market. It tried to raise $400 million in a flotation in 2010.

China General Nuclear Power, the country’s largest producer of nuclear energy which bought Meiya Power in 2010 for $700 million, also aims to list its shares in a Hong Kong flotation that could net the company $2 billion.

¬ Haymarket Media Limited. All rights reserved.
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