HONG KONG - Shares in China Longyuan Power Group Corp Ltd (0916.HK), the world's 5th-largest wind power generator, rose 9 percent on their Hong Kong debut though this was less than expected and came after a U.N. body blocked carbon financing for some China wind projects.
Longyuan's $2.2 billion IPO, the joint 8th-largest global offering so far this year, drew keen interest from investors eyeing the fast-growth renewable energy sector, and attracted wealth fund China Investment Corp (CIC), U.S. billionaire investor Wilbur Ross and China Life Insurance Group.
China aims to boost wind-generated power to 100 GW by 2020 with investments possibly worth over $150 billion, which will likely make it the world leader in wind energy.
Renewable energy accounts for just a fraction of 1 percent of China's total electricity output. The coal-dependent nation hopes to raise that to 10 percent by 2010 and 15 percent by 2020.
Longyuan, Asia's largest wind power generator, plans to use the IPO proceeds to construct mainland wind power projects and repay a bank loan.
However, its first-day gains were less than had been predicted, with analysts blaming a decision earlier this week by a United Nations agency to reject carbon financing for five of its wind projects.
Investors are worried about Longyuan's 2010 profit after the U.N. decision, which will limit its shares' near-term upside, said Teresa Chow, fund manager at RBC Investment Management.
Longyuan's debut compares favorably, however, with two recent big IPOs by Sands China (1928.HK) and Minsheng Banking (1988.HK), which recorded first-day falls of 10 percent and 3 percent, respectively.
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Shares of Longyuan, a subsidiary of China Guodian Corp. one of China's five largest power generation groups, ended at HK$8.93 on Thursday, versus a top-of-the-range IPO price of HK$8.16.
The benchmark Hang Seng Index .HSI eased 0.2 percent.
Under Kyoto's Clean Development Mechanism (CDM), companies can invest in clean energy projects in emerging countries like China and receive carbon offsets which can be sold for profit.
Longyuan played down the impact of the U.N.'s rejection, saying this would represent less than 1 percent of its 2009 net income. The company did not say if it has other projects pending CDM registration. There are over 200 Chinese wind farms in the CDM pipeline currently.
RBC's Chow noted that investors would be drawn toward the market leader as renewable energy was still a new sector to many, and companies are trading without solid track records.
Shares in smaller, Hong Kong-listed wind power generator China Windpower (0182.HK) and CP New Energy (0735.HK) fell 4.4 percent and 3.2 percent, respectively.
The Hong Kong retail tranche was more than 230 times subscribed, and that popularity triggered a clawback option, raising the retail portion to 20 percent of the total offering from 5 percent.
Longyuan's offer price represents a multiple of 28.9 times forecast 2010 earnings, in line with Spain's Iberdrola Renovables' (IBR.MC) 27.2 times and EDP Renovaveis' (EDPR.LS) 30 times, according UBS research.
Longyuan had a 24 percent share of China's wind power market in total installed capacity at end-2008. Its consolidated wind power generating capacity was 3,032 MW at end-September.
The underwriters on average estimated Longyuan's 2009 earnings would more than double to 890 million yuan ($130 million), and double again to 1.78 billion yuan in 2010.
Morgan Stanley (MS.N) and UBS (UBSN.VX) were the IPO's main underwriters.
(Editing by Ian Geoghegan)