Ming Yang's $400 million US IPO covered on day one

Strong demand for the Chinese wind turbine manufacturer gives a clear indication that there is still appetite for renewable energy, even though Chinese green energy companies have struggled in the overseas primary markets this year.

While several other Chinese renewable energy companies have decided to withdraw or postpone their overseas share sale plans citing volatile market conditions, wind turbine manufacturer China Ming Yang Wind Power kicked off the bookbuilding yesterday for an up to $400 million initial public offering on the New York Stock Exchange.

The share sale received strong interest with the deal fully covered on the first day by a mix of institutional investors, primarily Asia-based, according to sources.

This gives a clear indication that there is still appetite for renewable energy, even though Chinese green energy companies have struggled in the overseas primary markets so far this year.

Jetion Solar, a London-listed Chinese solar cell and module maker, earlier this week postponed a planned listing in Hong Kong (it didn’t disclose the deal size), while Xingjiang Goldwind Science & Technology, a Xingjiang-based wind turbine producer that is already listed in Shenzhen, scrapped a $1.2 billion Hong Kong IPO plan in June. The company is considering resuming the sale soon, but hasn’t decided on either the deal size or the timetable as the market is still volatile, sources say.

In the US, Nobao Renewable Energy, a provider of clean energy management solutions, shelved its $162 million ADS (American depositary share) sale in June, while Trony Solar, a Chinese manufacturer of thin-film photovoltaic modules, called off its plans for a listing on the NYSE last month. The Shenzhen-based company was in the market with a deal in December last year, but aborted the offering the day before pricing. Trony has opted for an IPO in Hong Kong instead and aims to raise up to $200 million, demonstrating its preference for the Asian market.

Bucking the trend, Ming Yang Wind Power is looking to raise between $350 million and $400 million ahead of a listing on the NYSE. The Guangdong-based company is offering 20% of its share capital, or 25 million ADSs, all primary. Each ADS represents one ordinary share.

The indicated price range of $14 to $16 per ADS, translates into around 8.5 times to 9.7 times forecasted earnings for 2011. Ming Yang’s larger domestic competitor, Xinjiang Goldwind, is currently trading at a price-to-earnings ratio of 16 times, but it is listed on the Shenzhen Stock Exchange. Another wind power group, Nasdaq-listed China Wind System, is quoted at a P/E of 12 times, but again, this isn't a particularly good reference since the company only makes components for wind turbine manufacturers.    

The Ming Yang deal comes with a 15% greenshoe option which, if fully exercised, would allow the company to raise up to $460 million by selling an additional 3.75 million primary shares.

The final price is expected to be fixed in the week of September 30 and the listing is scheduled for October 1. Bank of America Merrill Lynch, Credit Suisse and Morgan Stanley are joint bookrunners of the deal.

Ming Yang is a fast-growing wind turbine manufacturer that is engaged in designing, manufacturing, selling and servicing of megawatt-class wind turbines. It is the largest non-state-owned or controlled wind turbine manufacturer in China, as measured by installed capacity of wind turbines at the end of 2009. It has a 4.1% domestic market share.

The company has expanded designed annual production capacity of 1.5MW (megawatt) wind turbines from 288 units by the end of 2007 to approximately 1,340 units in the first half of 2010, it said in an IPO filing to the US Securities and Exchange Commission. It plans to use the proceeds to build manufacturing facilities, purchase equipment and investments in research and development, the company said.

The Chinese government, which is seeking to reduce emissions, is encouraging the development of the wind power sector. As a result, the number of wind turbine manufacturers has increased significantly in the past few years, and the combined installed capacity of domestic manufacturers of wind turbines is expected to reach 5,000MW per annum by the end of 2010, according to China's 11th five-year development plan for renewable energy. That would make China one of the largest wind power producers in the world.

However, like a senior SOE (state-owned enterprise) executive once said, in China, any business that receives Beijing’s encouragement could end up with excessive output. Analysts say there is a big surplus of wind-turbine factories producing equipment that can’t be used, primarily because the nation’s existing transmission network can't absorb the rate of growth in renewable-energy output.

Separately, Country Style Cooking, a Chongqing-based restaurant chain, is looking to raise up to $70 million in an IPO before listing on the NYSE. The company is offering 5 million ADSs, all primary, at $12 to $14 apiece.

The price range indicates a P/E ratio of 18 to 20 times, based on the company’s forecast earnings for 2011. The expected pricing and listing dates are September 28 and 29, respectively. BoA Merrill Lynch and Credit Suisse are managing the deal.

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