MAC: Mines and Communities

Asia Power to Buy Renewable Power Plants in China

Published by MAC on 2007-05-04
Source: Reuters

Asia Power to Buy Renewable Power Plants in China


4th May 2007

SINGAPORE - Power plant operator Asia Power Corp. Ltd. plans to buy one to two renewable energy plants in China every year, banking on the country's drive to curb growing pollution.

These plants would either be water or wind powered, Asia Power's Vice-President Tian Aimin told Reuters in an interview.

China has come under increasing pressure by the international community to rein in environmental pollution in many of its industries. The government said in March that it will raise renewable energy to 10 percent of total energy use by 2010, even as it continues to rely on coal for most of its energy needs.

Asia Power, founded in 1997, has snapped up stakes in eight plants across China -- five hydropower plants and three coal-fired plants -- taking its total generating capacity to 738 megawatts (MW).

"Our investment strategy is to acquire power plants that are already running," Tian said, adding that buying and running existing plants rather than building new ones was more profitable.

"Within three to five years, we hope our power generation can be more than 1,000 megawatts," he said.

The firm would take a controlling stake in these joint ventures and fund these acquisitions using either its cash reserves, bank loans or funds raised from the sale of shares, Tian said.

Asia Power, with a stock market value of US$88 million, is one of the few energy firms listed on the Singapore bourse and competes with China EnerSave which is valued at US$126 million.

Hydropower plants have lower operating costs, as they only require one-fifth of the manpower needed to run a coal-fired one, Tian said, adding that the firm does not have to buy fuel for the plant.

Shares of Asia Power gained 2.7 percent on Tian's comments to trade at S$0.38 by 0832 GMT.


Tian also said that Asia Power is in talks to buy one or two wind power plants in the provinces of Heilongjiang and Xinjiang and may conclude those deals by the end of this year.

As Asia Power shifts its focus to develop renewable energy, Tian said that the firm plans to sell two of its coal-fired power plants -- potentially worth about 400 million yuan (US$52 million) -- within the next two years.

Tian said that Asia Power does not plan to expand abroad, as it wants to capitalise on the rising need for energy in Asia's fastest-growing economy.

"Currently we still see a lot of opportunities to invest in China, so there's no need for us to go out," Tian said. "We are only limited by our size, so what we need is more funds to expand into the China market."

In 2006, Asia Power posted a near-doubling of net profit to S$19.9 million (US$13.12 million), on the back of the sale of two of its associates. Revenue rose 23.6 percent to S$98.1 million, after the firm recognised sales from its newest hydropower plant.

Shares in Asia Power have risen 15 percent so far this year, slightly underperforming the benchmark Straits Times Index which has risen by about 16.3 percent in the same period. (Additional reporting by Ovais Subhani)

Story by Wee Sui Lee


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