China Longyuan said to seek up to US$2.3 billion in IPO

China's biggest wind power producer plans to sell 2.14 billion shares in a Hong Kong IPO at HK$6.26 to HK$8.16 apiece, said three people familiar with its plan, who declined to be identified before an official announcement.

China WindPower Group Ltd. and China Solar Energy Holdings Ltd. have more than doubled in Hong Kong trading this year as the Chinese government encourages the use of renewable energy. China's wind-power capacity will increase more than fivefold in the next decade, Zhang Guobao, head of the government's National Energy Administration, said on May 26. “There seems to be a lot of interest from institutional investors in a renewable energy company like this,” said Barbara Hon, an analyst at Everbright Securities Co. in Hong Kong. “The move toward renewable energy is an irreversible trend and investors are looking for solid, good-quality companies like this which have state backing.”

The top end of the range values Beijing-based Longyuan, which is selling a 30 percent stake in the IPO, at HK$58.3 billion, or 28.9 times its 2010 earnings per share, as estimated by banks involved in the sale, two of the people said.

Iberdrola Renovables SA is valued at 28.4 times its estimated 2010 earnings per share. The renewable-energy unit of Spain's largest utility raised $6.6 billion in December 2007 in the world's largest alternative energy IPO since at least 1999, according to data compiled by Bloomberg.

The $2.4 billion share sale of EDP Renovaveis SA, the renewable energy unit of Portugal's largest power company, in June 2008 was the world's second-biggest alternative energy IPO since 1999. The stock is valued at 32.6 times its 2010 estimated earnings per share.

Four so-called cornerstone investors, including companies linked to China Life Insurance Co.; Bank of East Asia Ltd. Chairman David Li; Hong Kong-based asset manager Value Partners Group Ltd. and WL Ross & Co. LLC, have agreed to buy shares with a combined value of $330 million in Longyuan's IPO, said the people.

Cornerstone investors are guaranteed shares in a Hong Kong IPO in exchange for a promise not to sell the stock for several months. Morgan Stanley and UBS AG are managing the sale.

Companies including China Longyuan, Sands China Ltd. and Chinese property developer Kaisa Group Holdings Ltd. have announced plans to raise as much as a combined $5.4 billion in share sales in Hong Kong since the weekend. China Minsheng Banking Corp. will begin trading on the city's bourse this week after raising $3.9 billion.

China Longyuan, a subsidiary of state-controlled electricity producer China Guodian Corp., is the nation's first developer of wind farms and accounts for 24 percent of the nation's wind-power capacity, according to a Nov. 6 Morgan Stanley report.

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