China Life Insurance Group Co, the country's largest insurer, will buy a 40 percent stake in Beijing Energy Investment Group Co for 10 billion yuan, industry sources said.
The cash injection is expected to restructure State-owned Beijing Energy Investment Group into a limited corporation and eventually list its entire assets.
Beijing Energy Investment Group has been looking for a Hong Kong listing but the plan was recently vetoed by the China Securities Regulatory Commission.
Industry observers now expect Beijing Energy Investment Group, which specializes in developing new and renewable energy, to list its entire assets via its Shanghai-listed arm, Beijing Jingneng Thermal Power Co Ltd.
The cash injection by China Life seems to have increased the possibility. China Life has signed a framework agreement with Beijing Energy Investment Group for the 10-billion-yuan investment, sources said.
A certified public accountant has finished auditing the group's accounts to determine the quality of assets. It's unclear when they will sign a formal agreement.
Chen Yicong, an electric power industry analyst with Southwest Securities, said Beijing Energy Investment Group will "most likely" inject all of its assets into Beijing Jingneng Thermal Power Co Ltd for a mainland listing since its Hong Kong listing plan has been turned down by the regulator.
Jingneng is one of the nine subsidiaries controlled by the group. Earlier media reports said the group has been seeking to merge the nine into a new entity called Beijing Energy International Corp for a Hong Kong listing.
Beijing Energy Investment Group recorded a profit of 1.45 billion yuan last year, according to its website. The group has stakes in 22 power companies. It's the largest shareholder of Beijing Jingneng Thermal Power Co and the second largest in Hong Kong- and London-listed Datang International Power Generation Co.
"China Life is apparently anticipating a high return from the pre-IPO investment in Beijing Energy Investment Group. The deal is similar to the one in which China Life acquired stakes in China CITIC Securities Co and profited from the broker's rising share prices," said Chen.
Equity investment in other companies accounted for 70 percent of China Life's net profit in the first half of this year.
(China Daily November 9, 2007)
