CGN Power shares tumble after it buys parent’s chief resources for 9.92bn yuan

CGN Power’s shares forsaken 2.5 per cent on Monday after it suggested it was shopping 3 resources from a parent, China’s largest chief energy projects developer China General Nuclear Power Corp, for 9.92 billion yuan.

The association will squeeze a parent’s 61 per cent interest in Guangxi Fangchenggang Nuclear Power, that is building a 6 giga-watt chief energy era plan in Fangchenggang, Guangxi Zhuang unconstrained region.

It will also buy 100 per cent of CGN Lufeng Nuclear Power and 100 per cent of China Nuclear Power Engineering.

The due transaction will “further connect a vital position as CGN’s solitary [listed] height for chief energy generation, … [improve] a construction and supervision capability and revoke a chief energy [plant] construction costs”, a organisation pronounced in a filing on Monday to Hong Kong’s bourse.

CGN Lufeng is building a 2.5 GW chief energy plant in Lufeng, Guangdong province, that is undergoing basic work after receiving supervision approval.

CGN Engineering is a plan construction supervision firm, that has finished 12 reactors in China given a pregnancy in 1997. It has also won sequence for another 12 reactors.

Units 1 and 2 of a Fangchenggang plan has sum ability of 2.17 GW and is formed on a mature CPR1000 design, while units 3 and 4, that will adopt a yet-to-be-commercialised Hualong 1 third-generation design, are not nonetheless complete.

The due acquisitions will accelerate CGN Power’s plan tube and handling scale, that during a finish of Jun had 16 handling chief reactors with sum ability of 17.1 GW, and was handling 12 reactors underneath construction totalling 14.65 GW.

The association had a 59.8 per cent share in all of mainland China’s handling chief energy plants, and 49.7 per cent of reactors underneath construction.

The 3 resources to be acquired have a total equity value of 10.25 billion yuan during a finish of 2015.

Guangxi Fangchenggang had a net detriment of 26.4 million yuan final year and a detriment of 26 million yuan in 2014. It started producing energy early this year and realised 607.9 million yuan of income in this year’s initial quarter.

CGN Engineering available a net distinction of 910.9 million yuan final year, 10.5 per cent aloft than 2014.

Although CGN Power’s handling scale is approaching to grow almost in a subsequent few years, analysts remarkable profitability will be squeezed by descending plant utilization rates as overcapacity of China’s energy attention is increasingly inspiring a chief energy shred that has historically enjoyed high plant utilisation.

“Due to China’s over-abundance electricity supply, we have already seen proxy outages during a Hongyanhe and Ningde chief energy plants, and trust these outages might gradually widespread to other tools of China,” pronounced Dennis Ip, Daiwa Capital Markets conduct of Hong Kong and China utilities, renewables and sourroundings investigate in a report.

Industry regulator, a National Energy Administration, is also consulting a attention on intensity reforms on tariffs setting, that could theme chief plants to cost and sales volume foe for a certain apportionment of their outlay for a initial time. All tariffs are now set by a state.

CGN Power is foresee to see net distinction arise to 9.5 billion yuan in 2018 from 6.6 billion yuan final year, according to a normal guess of 22 analysts polled by Thomson Reuters.

The due acquisitions will be theme to capitulation by eccentric shareholders.

CGN Power shares have depressed 15.4 per cent year-to-date, underperforming a benchmark index’s 7.2 per cent gain.