China Power International Development, a unit of the fifth-largest Chinese power producer, expects that the acquisition of Wu Ling Power Corp from its parent will be completed by the end of this year.

The power producer has signed a Memorandum of Understanding (MOU) with its parent company China Power International Group to acquire a 63-percent stake in Wu Ling Power.

Chairman Li Xiaolin said after the company's annual general meeting yesterday that the acquisition will be completed this year.

However, the transaction price has not been confirmed yet.

The acquisition is a milestone for the company, she said, building up its hydropower capacity. She also added that the company will focus on thermal power production and large-scale hydro-power production in the future.

Wu Ling Power is principally engaged in the development, production and supply of hydropower in Hunan and Guizhou provinces. As at Dec 31, 2007, Wu Ling Power has an installed attributable capacity of 3,542 MW.

Shares in China Power International gained as much as 4 percent hitting HK$2.53, but made a turnaround to close at HK$2.48, losing 0.4 percent.

A Hong Kong-based analyst Pierre Lau at Citigroup wrote in a research note that the potential deal looks positive. "It would increase China Power International's attributable capacity by 28 percent, diversify its fuel-cost risk and enlarge its 2008 net profits by 99 million yuan."

Chinese power producers are increasing output to meet demand from carmakers, factories and petrochemical plants in the world's fastest-growing economy. China Power International said earlier that the firm intends to keep adding capacity in the coming year, bringing it to 15,000 MW by the end of 2010.

The mainland power producers are still affected by the rising coal prices. Li said that four of the five-biggest power producers were running into deficit in the first quarter other than Huaneng Power International.

Li urged the government to approve the coal-electricity price linkage mechanism as soon as possible, if the mechanism cannot be launched shortly. She suggested the government to consider alternative policy.

She also added that the coal costs have increased by 12 percent to 15 percent this year.

(HK Edition 05/29/2008 page2)