The China Yangtze River Three Gorges Project Development Corporation is expected to establish a spin-off company later this month for the listing, according to Kou Riming, director of the company's restructuring office. The subsidiary company will be a shareholding firm worth US$920 million and will be called the China Yangtze Electric Power Corporation. The company is expected to use the proceeds of its listing to fund the acquisition of the project's first two or three electricity generators.

The generators are expected to cost a combined total of 9 billion to 10 billion yuan (US$1.1 billion to US$1.2 billion). One-third will be raised from the listing, and the remaining two-thirds will be funded by bonds and loans, Kou told China Daily.

"We have decided to list next year as we hope to take advantage of the project's prestigious influence to start to generate electricity at that time," said Kou.

The first four generators will have a combined capacity of 2.8 million kilowatts and are due on-stream between August and November next year. The installation of a further 22 generators will be completed in seven years and will have a capacity of 15.4 million kilowatts.

Kou said the central government, in a measure to support the listing, has cut the value-added tax payable on the electricity generated by the Three Gorges project to 8 per cent from the 17 percent currently levied on other hydropower plants.

The government is also considering raising the price of electricity generated by the parent corporation's Gezhouba Power Plant.

The shareholding company will incorporate the assets of the parent firm's Gezhouba plant, so the parent company will take an 89.5 per cent stake in the new subsidiary.

An industry analyst from a Beijing-based investment bank said the outlook is positive for Yangtze Electric Power.

"A stable return is expected from the company since the project is one of the largest schemes pushed by the government," said the analyst.

Under Kou's scheme, the company to be listed will continuously raise funds for the acquisition of two or three generators from the parent corporation. The parent company will use the money it receives to build the remaining generators and another two hydropower projects on the upper reaches of the Yangtze River.

"The listing will provide us with a platform for continuous acquisitions for expansion," said Kou.

But overseas investors, including Hong Kong's CLP, have refused to buy stakes in the new company due to "different opinions on the controversial project."

In August, the energy giants China National Petroleum Corporation, China National Nuclear Corporation, and Huaneng Power International Power Development Corporation agreed to each invest 255 million yuan (US$30 million) for a 3 percent stake in the China Yangtze Electric Power Corporation. The parent corporation will take a controlling 89.5 percent, while two design and construction companies will have 1.5 percent combined.

(China Daily September 9, 2002)