Sinovel Wind to raise up to $1.4b in Shanghai IPO

Updated: 2011-01-04 16:39
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SHANGHAI/HONG KONG - Sinovel, China's top wind turbine producer, plans to raise up to $1.4 billion through an initial public offering in Shanghai, hoping to ride high on the back of strong demand for Chinese renewable energy stocks.

Sinovel Wind Group Co, which on Tuesday set a higher-than-expected price range for its IPO, looks poised to become China's first major IPO of the year.

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It follows a bumper 2010 for IPOs in Asia, where companies raised over $50 billion in Hong Kong alone.

Still, the Sinovel listing may well be a test for China's IPO market, which had a mixed performance late last year with some firms such as China's No 3 wind company Huaneng Renewables Corp scrapping plans to list in Hong Kong due to market volatility.

Sinovel will sell up to 105.1 million shares at 80-90 yuan apiece, according to an exchange filing, potentially enabling the firm to raise as much as 9.46 billion yuan ($1.4 billion), nearly three times its original target of 3.45 billion yuan.

Sinovel's IPO range represents 43.41-48.83 times the company's 2009 earnings, compared with an average of around 30 times for Shanghai IPOs last year.

"The company has been growing very rapidly in the past few years, so if you look at expected profit for 2011, the valuation is not really high," said Qi Qi, an analyst at Shenyin Wanguo Securities Co in Shanghai.

"But the industry's growth has already been slowing due to increasing competition, and Sinovel's growth will also be restricted by the fact that it's already the market leader, so I don't expect to see a very feverish debut."

Qi expects Sinovel's profit to grow about 30 percent this year, which means the IPO range values the company at around 20 times P/E ratio.

Renewable energy push

Sinovel, which will hold an online roadshow for retail investors on Tuesday, has said it will use the proceeds of its IPO to build more wind power installed capacity, including a 3 megawatt wind power generator, and for research and development.

China has been doubling installed wind power capacity every year for the past several years as it pushes ahead to develop the sector, with some of the $1.5 trillion investments over the next five years earmarked for the green sector.

In 2009, China became the third largest wind energy provider worldwide, ranking behind the United States and Germany.

Despite increasing competition, Sinovel still cannot meet rising customer demand and consolidation in the sector would benefit the industry, Sinovel said in its IPO prospectus.

Sinovel competes with major domestic rivals Xinjiang Goldwind Science and Technology and Dongfang Electric Corp as well as global competitors including Vestas Wind, Siemens and General Electric Co.