Sunday, May 20, 2007

China Power to spend US$4b on renewable energy

(Reuters) Updated: 2007-05-08 09:42

China Power International plans to spend up to US$4 billion by 2010 developing renewable energy as Beijing pushes to clean up its air and water and whittle down its reliance on imported resources.

To help bankroll the investment -- one of the largest planned investments in renewable energy ever announced by a corporation -- the company is studying listing shares on mainland stock exchanges, Chief Executive Li Xiaolin told reporters on Monday.

Hong Kong-listed shares in the company fell 0.5 percent on Monday, lagging a 0.27 percent gain in the benchmark Hang Seng Index.

China intends to spend an estimated US$200 billion on renewable energy over the next 15 years, partly to build hydropower, wind- and solar-powered plants to fuel growth in the world's largest energy consumer after the United States.

The government aims to boost renewable energy to 10 percent of energy use by 2010 and has ordered its largest power firms to ensure that 5 percent of their generation runs on renewable sources by the end of this decade, rising to a 10th by 2020.

State-run firms from China Power to larger rivals such as Huaneng Power and Datang International Power are gearing up commercial projects.

China Power International, which became the second-largest shareholder of Oriental Investment Corp. this month, wants to change that firm's name to China Power New Energy Development Co. and re-focus it on renewable energy.

By 2010, China Power International plans to put into operation 1,000 megawatts (MW) of renewable energy capacity -- including wind, hydropower and biomass -- have another 1,000 MW under construction and have a further 1,000 MW in the pipeline.

"It typically takes 8 to 10 billion yuan to build 1,000 megawatts of renewable capacity. So the total investment will be 24 to 30 billion yuan (US$3.1-US$3.9 billion)," said Liu Genyu, Oriental Investment's chief operating officer.


Analysts say high costs and low tariffs for renewable energy mean profit uncertainty, but executives remain optimistic.

On the face of it, China Power's five-year investment plan dwarfs spending by the world's largest oil firms. The country spent US$6 billion on renewables in 2005, excluding large hydropower projects, the Xinhua News Agency cited academics as saying.

Shell has invested an estimated US$1.25 billion from 1996 to 2006, according to calculations based on official data and company information, making the Anglo-Dutch company the oil sector's biggest investor in green energy.

And BP Plc. has spent around US$900 million on renewables since 1999, according to published figures and information from BP sources.

"Because of low tariffs and high costs, there are different views on profitability of renewable energy. But we believe the government is endorsing development of new energy and will gradually issue favourable policies," Liu said.

Datang, China's second-largest listed electricity provider, aims to generate 20 percent of its total power output via hydro by 2010 from about 2 percent in 2006.

An A-share sale -- if allowed -- might help with some of the costs.

Many Hong Kong-listed Chinese firms, eyeing record-high valuations in Shanghai and Shenzhen, are pondering mainland listings as a ready source of ample cash.

But regulations are sketchy on whether red chips such as China Power, which are backed by Beijing but registered in Hong Kong or overseas -- making them essentially foreign firms -- can list easily in the Chinese mainland.

"The domestic A-share market is doing very well. We are actively studying the possibility of going back for a listing," Li said without elaborating.

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