CGN opens books for biggest Hong Kong listing for year to date

CGN Power, China's top nuclear power producer, has opened the books on the largest Hong Kong listing of 2014, part of a rush of mainland companies looking to raise cash before the year end.

CGN is planning to sell shares worth up to $3.2bn, according to a termsheet seen by the Financial Times, which would make it the biggest initial public offering in the city since Everbright Bank raised a similar amount last December.

Hong Kong's IPO market has been dogged by poorly performing deals this year. WH Group, which at one point was looking to raise more than $6bn, was forced to postpone its debut in April, even after cutting the size of the deal. The pork producer later revived a smaller, cheaper stake sale, only to see the share price slide still lower.

Tianhe Chemicals has also dropped significantly since raising $650m in June. Though the stock performed well initially, Tianhe's shares fell one-fifth after attracting the attentions of short-sellers unconvinced by the company's financial accounts. Of all the new listings in Hong Kong this year, only half have risen from their offer price.

Bankers hope that a late flurry of large deals, of which CGN is the first, will help lift Hong Kong's IPO market above London in the global rankings. Early meetings with investors are said to have gone well, with strong initial interest in CGN.

Founded in 1979, CGN generates 55 per cent of China's nuclear energy output from 11 plants, according to its prospectus. Most of that supplies the grid in the southern provinces of Guangdong and Fujian, as well as to Hong Kong itself. It recorded profit attributable to shareholders of Rmb4.2bn ($685m) in 2013, roughly flat from the year before.

The company plans to use the new capital to help finance the purchase of additional shares in Taishan Nuclear Power, which operates two power stations. CGN signed an agreement last month to increase its holding in Taishan from 41 per cent to 51 per cent.

Some of the proceeds will also be put towards new plant construction, research and development, debt servicing, and an expansion overseas. At the end of September, CGN had Rmb81.5bn in interest-bearing debt, according to its listing documents.

CGN hopes to benefit from Beijing's campaign to battle air pollution, which should see more power generation shift away from coal towards cleaner types of fuel, including nuclear. The company plans to price its shares on December 3, and begin trading a week later.

The final month of the year is gearing up to be a busy one for Hong Kong's equity market bankers, much as it has been in previous years. Sinopharm also announced on Monday that it will raise HK$5.6bn ($716m) from a share placement, while Wanda Commercial Properties is planning a $3bn-$5bn listing.

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