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Yangtze plans acquiring bank stake
By Xie Ye (China Daily)
Updated: 2004-07-29 08:33

China Yangtze Power Co Ltd - an operator of hydropower generators at the gigantic Three Gorges project - says it plans to invest 2 billion yuan (US$241.8 million) in cash to buy stakes in the proposed China Construction Bank Corp.

China Yangtze Power may become the first sponsor for the China Construction Bank Corp. The banking corp is likely to be set up this year as a spin-off company from China Construction Bank - one of the nation's four largest commercial banks - to seek overseas listing.

China Yangtze Power yesterday also said that it plans to acquire two 700-megawatt hydropower generators of the US$22 billion Three Gorges project from its parent company - China Yangtze Three Gorges Project Development Corp.

The acquisition will go through at the beginning of next year. If finalized, the deal will increase the company's generating capacity by a quarter from the current 5,515 megawatts.

The company will borrow from banks and financial institutions to finance the acquisition. It estimated the deal will cost no more than 9.8 billion yuan (US$1.2 billion).

The investment and the acquisition proposals were put forward at the board meeting on Monday, and are subject to the approval of the general conference of shareholders on August 30.

The Three Gorges project, the world's largest hydropower project, will have 26 700-megawatt generators upon completion in 2009. Nine generators have so far commenced operations.

China Yangtze Power bought four generators last year for 18.7 billion yuan (US$2.3 billion).

The announcement said the board proposed this acquisition should not exceed 105 per cent of the average 4.675 billion yuan (US$565.3 million) for each generator it paid last year.

Analysts said the acquisition is in line with market expectations. The company earlier said it would buy at least two or three generators from its parent company every year for expansion.

But analysts are concerned that the company's investment in China Construction Bank Corp may tighten China Yangtze's cash flow, which may have a negative impact on the company.

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