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Alliant Pulls Plug on Power Facilities

Posted on: Monday, 13 February 2006, 18:00 CST

By Wang Ying

Alliant Energy Corporation, a US-based power firm, announced late last week that it has sold its interests in eight power facilities in China for a combined US$123 million, and is planning to sell its remaining two plants, with local companies rumoured to be in the running.

Alliant has agreed to sell four power facilities to Banpu Plc, Thailand's biggest coal mining company, for US$84.3 million.

In a statement, the Madison, Wisconsin-based company said the deal was expected to close in two stages over the next 8-10 weeks, with the most significant portion to close by the end of February.

The sale will release Alliant Energy from all of the US$23 million debt associated with these plants, it said.

Sources close to the deal told China Daily yesterday that Alliant might sell some of the remaining six plants that Bangu didn't buy to local companies in China, but they didn't specify the names of the companies.

Alliant previously sold its interests in four other facilities in China for about US$39 million, the company said. It is also working to sell its last two plants, which have a combined book value of less than US$5 million.

By selling its China assets, the company aims to put more focus on its domestic business in the United States and divest its non- core investments, it said.

Alliant Energy, a Fortune 1000 company traded on the New York Stock Exchange, lost US$7.7 million last year, or 7 cents a share, on US$3.28 billion in revenues. In 2004 the company earned US$145.5 million, or US$1.28 per share, on revenues of US$2.8 billion.

Banpu boosted its presence in China's mining and energy industries through the transaction with Alliant.

The plant purchase will provide "a solid platform for further growth" for Banpu in China, Chanin Vongkusolkit, chief executive officer of the Thai energy firm, said in a statement.

All four plants bought by Banpu are coal-fired plants that generate both electricity and heat, and are located in the northern and eastern parts of China. Their coal is sourced from local mines or mines in neighbouring provinces.

"Through existing coal mining ventures in China or through new coal investments, Banpu will gradually seek to develop vertical synergies with the power operations acquired," the Thai mining company said.

China's electricity tariffs are capped by the government, but prices of coal, which are more market-based, have been going up due to a supply-demand imbalance and transportation bottlenecks.

The situation has greatly squeezed margins of China's coal-fired power producers and dampened the enthusiasm of overseas investors.

Chang Jianping, a director at the industry watchdog, the State Electricity Regulatory Commission of China, said foreign power firms are retreating more on worries of unknown policy risks, as China's power sector is undergoing "substantial reforms."

But he predicted the scenario would change in favour of foreign investors in about half a decade, because much of the transformation work to marketize China's power sector is to be completed within the next five years.

A company official of AES China Generating Co Ltd, now the only US power company operating in China, did not agree.

He said foreign firms have to pay much higher operation costs than domestic majors such as Huaneng and Datang, and the situation would not change in the next five years.

Source: China Daily; North American ed.

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