By Wang Yu and Hui Ching-hoo (China Daily)
Updated: 2007-08-29 11:36

The mainland's top electricity generator listed in Hong Kong has unveiled plans to issue bonds and expand capacity, moves analysts say will strengthen its foothold as a first-tier player in the industry.

"Datang Power is a first-tier power firm listed in Hong Kong, with sound fundamentals. The investment to be made and bonds to be issued for capacity expansion and new projects are in line with market expectations and will play a positive role in trimming loan interest costs," said an analyst with Guotai Jun'an Securities, which has business ties with Datang Power.

Datang International Power Generation Co yesterday said it will invest 22.6 billion yuan (US$3 billion) in the next three years to expand capacity, Bloomberg reported.

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On Monday, the Beijing-based power company stated its plans to sell 6 billion yuan of corporate bonds to finance new projects, which include two power plants in Shanxi and Jiangxi provinces and a coal-based olefin project in the Inner Mongolia Autonomous Region.

"The investment return rate for the olefin project is estimated by Datang Power to be at least 15 percent. It's related to Datang's pillar coal business as well," said the source from Guotai Jun'an Securities who declined to be named.

But Datang's new projects have also prompted criticisms from quarters that say the firm's coal-chemical project is not water-efficient and environmentally friendly.

Once completed, the olefin project will be able to produce 460,000 tons of polypropylene and byproducts annually, the company said.

Enjoying low coal sourcing price and rapid capacity increase, Datang Power has witnessed its share price soar both in Hong Kong and Shanghai.

The company's shares in Shanghai have risen more than fourfold this year while its Hong Kong shares have more than doubled, compared with an 18 percent rise of the latter's benchmark Hang Seng Index.

Patrick Shum, chief portfolio strategist of Karl Thomson Securities, said the result is in line with market expectations. "However, the price seems overshot because of excessive speculation on price discrepancy between A and H shares."