China Longyuan Power Group Corp. may raise as much as HK$17.5 billion ($2.3 billion) in the world’s third-largest alternative energy initial public offering since at least 1999

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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 towards renewable energy is an irreversible trend and investors are looking for solid, good-quality companies like this which have state backing.”

“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 towards renewable energy is an irreversible trend and investors are looking for solid, good-quality companies like this which have state backing.”

Valuation

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.

No. 5 in World

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.

The company’s installed capacity of 2.9 gigawatts ranked it the fifth-largest wind-power producer globally, the report said, citing data from renewable energy consulting firm BTM Consult ApS.

Profit will likely rise 162 percent this year to 885 million yuan ($129.6 million) on increased capacity and electricity generation, the Morgan Stanley report said. Revenue may increase 14 percent to 7.2 billion yuan, it said.

Greenhouse Gases

Longyuan was capable of generating about 2,630 megawatts of wind power in 2008 and this will be raised to 6,000 megawatts by next year, Vice President Huang Qun said June 2. One thousand megawatts is enough electricity to power about a million homes.

Capital expenditure investment to construct new projects in the fourth quarter and next year will reach about 33 billion yuan, according to a draft IPO prospects seen by Bloomberg News.

Longyuan is also looking to invest in wind projects overseas and to develop offshore wind farms off the coast of China, the prospectus said.

China, the world’s biggest producer of greenhouse gases, burns coal to produce 80 percent of its electricity and wants at least 15 percent of the nation’s energy to come from renewable sources by 2020.

A call to Longyuan’s Beijing headquarters this morning went unanswered. Noel Cheung, a Hong Kong-based spokeswoman at Morgan Stanley, and Mark Panday, a spokesman for UBS in the city, declined to comment.

Thirty-eight IPOs in Hong Kong in the first 10 months of the year raised a combined HK$107 billion, a survey by the accounting firm Ernst & Young LLP said Nov. 10. That’s 62 percent more than capital raised last year, it said.

Sands China and parent Las Vegas Sands Corp., the casino company controlled by billionaire Sheldon Adelson, on Nov. 21 raised HK$19.4 billion in a Hong Kong initial public offering conducted at the bottom of the marketed range.

Kaisa, a property developer in southern China’s Pearl River Delta, may get as much as HK$4.45 billion in an initial share sale in Hong Kong.

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