The largest power producer in the US sold down its entire stake in Shandong International Power Development (SIPD) yesterday (Tuesday) as part of a strategy to dispose of non-core assets across Asia.
BNP Paribas Peregrine was sole placement agent for the 9.99% stake, which Mirant purchased at the time of SIPD's flotation in June 1999 at HK$1.73 per share. The 525.083 million shares were priced at a 10% discount to a HK$2.025 close, raising HK$1.063 billion ($136 million).
The steep discount was necessitated by the large size of the stake, which represented over 50 days trading volume and increased the 27.22% freefloat by a further 36%. The IPP's main shareholders are Shandong Electric, a subsidiary of the all-powerful State Power Corporation, which holds 53.56% of the equity and Shandong International Trust and Investment Corporation, which holds 17.19%.
Having launched the placement at 4.15pm Hong Kong time, books were already said to be comfortably oversubscribed by Asia's close, with strong participation by retail accounts.
Chinese power stocks have been strong outperformers since the fourth quarter of last year, with SIPD rising 21.26% year-to-date. Performance has been spurred by the government's plans to overhaul the entire power sector by splitting transmission and distribution activities from generation and creating five powerful IPP's, of which SIPD is seen as one of the chief beneficiaries for future asset injections.
However, bankers argue that the stock still has plenty of upside since it trades at a discount to both Huaneng Power International (HPI) and Beijing Datang. In terms of p/e, for example, SIPD is currently trading at 7.3 times foward earnings compared to 10.6 times for HPI and 10.7 times for Beijing Datang. Partly this is said to be because SIPD has a smaller market capitalization and partly because of the overhang created by the prospect of Mirant's share sale.
At the end of 2001, SIPD had roughly MW5,000 in capacity and plans to expand by a further 55.4% through to 2006. Net income also rose 3% during 2001 to $167 million.
