China Resources Power shares dive 5.8% after firm raises US$927 million via placement

Shares of China Resources Power (CRP), one of the nation’s most profitable power generators, plummeted after it raised HK$7.2 billion (US$926.6 million) by selling shares at a discount. Rival China Longyuan Power Group gained after unveiling a deal to buy 1.69 billion yuan (US$237 million) worth of wind-farm assets from its controlling shareholder.

State-controlled CRP sold 198.5 million new shares to public investors at HK$19.70 each, a 5 per cent discount to Monday’s closing price of HK$20.75, for HK$3.9 billion.

Its parent company also took up an additional 168 million shares in a separate placement worth HK$3.3 billion.

CRP shares fell 6.6 per cent to HK$19.38 on Wednesday as the Hang Seng Index gained 1.3 per cent. The shares have gained as much as 16.7 per cent since Beijing announced a raft of measures last month to boost sagging economic growth and rescue the property and stock markets.

Considering prevailing market conditions and the share price, the directors consider the share sale “appropriate to replenish the company’s cash resources”, the company said in a statement on Wednesday. The proceeds will be used for operational and general corporate purposes, including repaying bank borrowings and other bills, it added.

“We expect a short-term share price correction on the placement given the high share price,” Dennis Ip, Daiwa Capital Markets’ regional head of power, utilities, renewables and energy storage, said in a note.

CRP had HK$9.96 billion of cash at the end of June, and its debt net of cash stood at 156 per cent of its shareholders’ equity, up from 153 per cent at the end of last year. Borrowings grew by HK$18.7 billion in the first half of the year.