China’s state-owned electric utility giant China Huaneng Group Co. plans to acquire and delist its Hong Kong-listed wind power unit.
Huaneng Group didn’t disclose the terms of a potential offer in a filing to the Hong Kong stock exchange Monday, only saying that acquiring all the outstanding H shares could result in the privatization and delisting of Huaneng Renewables Corp.
Shares of Huaneng Renewables jumped 21.66% Monday to close at HK$2.64 ($0.34).
Undervaluation of Hong Kong-listed H shares is usually the main reason for the privatization of mainland companies, said Zhou Jianfeng, an analyst at brokerage Zhongtai Financial International Ltd. Among energy stocks, the premium of mainland-listed A shares to H shares could be as much as 100%-200%, he said.
Huaneng Renewables has good fundamentals and reported better-than-expected half-year earnings, which may trigger a high premium offer from the parent company, Zhou said.
Analysts at Credit Suisse AG said the privatization plan could boost short-term stock prices of the wind energy sector.
Huaneng Renewables went public in Hong Kong in 2011. For the first half of 2019, the company posted 31.7% growth in profits to 3.09 billion yuan ($430 million) and a 13% increase in revenue to 7.14 billion yuan. As of the end of June, the company had net assets of 30.9 billion yuan.
The parent company owns 52% of Huaneng Renewables’ shares. Other major holders include JPMorgan Chase & Co. with 4.29%, Citigroup Inc. with 4.05% and BlackRock Inc. with 2.87%.
This is not the first case of privatization of Hong Kong-listed units of state-owned utilities. In March, State Power Investment Corp. announced a plan to delist its clean energy development unit, China Power Clean Energy Development Co. Ltd.
State Power attributed the delisting to long-tern low turnover and poor performance of the unit’s stock, making it difficult to raise funds from the stock market.
Contact reporter Denise Jia (huijuanjia@caixin.com)
