CGN Power Co - the mainland's largest nuclear power producer - plans to raise up to $3.2 billion in an initial public offering in Hong Kong, which could be the largest in the SAR this year.

The Shenzhen-based company is offering 8.83 billion shares at HK$2.43 to HK$2.78 each. It began taking orders on Monday and plans to start trading on Dec 10. At the top end of the range, CGN Power's sale would top the $3.1 billion raised by Li Ka-shing's HK Electric Investments in January - the biggest IPO in Hong Kong so far this year.

So far, support for about 40 percent of the offering has come from 18 cornerstone investors, who will buy and hold the shares for at least six months once the company is listed.

Part of CGN Power's IPO proceeds will be used to expand its installed capacity with nine new power generating units and increase its stake in a nuclear power station, according to its preliminary IPO prospectus.

Some of the proceeds will also be put into research and development, debt servicing and overseas expansion.

"As the nation's largest nuclear power plant operator, the demand for CGN Power stock is absolutely overwhelming," said Kenny Tang Shing-king, head of research at Redford Securities. He projected that CGN Power would see great growth potential in the future, underpinned by its solid core business development and the nation's strong support.

At a briefing earlier this month, Guo Chengzhan, vice-head of China's National Nuclear Safety Administration, said: "Nuclear power is China's only scalable replacement energy and is a vital choice in the country's energy strategy." The mainland is building more nuclear plants to reduce its reliance on coal, which makes up around 70 percent of its total power capacity. Renewable energy now accounts for less than 10 percent of total energy production.

The mainland government has set a target to get nuclear power make up 2.7 percent of its total power capacity by next year - up from less than 2 percent at present.

"I believe CGN Power will be heavily oversubscribed in its Hong Kong IPO," stressed Tang. "Maybe, it going to be 10-fold, but it's hard to forecast the exact oversubscribed figure as it is a mega IPO."

CGN Power generates 55 percent of mainland's nuclear energy output. It currently operates 11 nuclear power generating units mainly in Guangdong province. In the first half of this year, CGN's net profit dropped 3 percent to 2.57 billion yuan, but its sales of electricity rose 19 percent, according to the company's prospectus.

Contact the writers at felix@chinadailyhk.com and celia@chinadailyhk.com

(HK Edition 11/25/2014 page8)