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Three Gorges Dam owner to sell off shares of project

Power shares * China Yangtze Power plans to sell US$4.2 billion of shares over seven years. * The company will sell 5 billion yuan of shares a year to the public starting as early as July. * The dam is expected to generate 84.7 billion kilowatt-hours of electricity, the equivalent of 10 nuclear reactors.

The owner of Three Gorges Dam, the world's largest hydropower project, plans to sell 35 billion yuan (US$4.2 billion) of shares over seven years, China's biggest attempt to fund a government project on the stock market.

China Yangtze Power Corp will sell about 5 billion yuan of shares a year to the public starting as early as July to pay for the dam's 26 generators, said Restructuring Director Kou Riming.

The sale is timed to coincide with the start of the first two generators in August.

"As we have to keep returning to the equity market to raise money, we want make sure our company generates enough profit to stay attractive to investors for years to come," said Kou.

The total sale, which would amount to China's biggest, is being offered to domestic rather than overseas investors after the dam drew criticism from some environmentalists and engineers. They say it won't meet flood prevention and power targets and will displace more than 1 million people.

"Environmental concerns are part of the agenda" for foreign investors, said David Yip, an analyst with HSBC Securities in Hong Kong.

Citic Securities Co is advising the company on the sale. Yangtze Power hasn't chosen an underwriter, Kou said. The stock sales to Chinese investors would pave the way for share sales to overseas investors in Hong Kong and New York "in three to five years," he said.

"Many foreign investors still have misgivings about the Three Gorges project, be it from the environment or efficiency standpoint, and they may not respond well to our share issue," said Kou. "Domestic shareholders know us better. We believe we will get a good reception from them."

The Three Gorges Dam was proposed by Sun Yat-sen more than eight decades ago. The project, resurrected by former Premier Li Peng, will flood more than 24,500 hectares.

The dam, under construction on the Yangtze River in Hubei province, is 2,309m long and 185m high. It's expected to generate 84.7 billion kilowatt-hours of electricity when completed in 2009, the equivalent of 10 nuclear reactors.

Yangtze Power hopes to raise at least 4.5 billion yuan at its share sale this year, Kou said. Chinese companies plan to sell 100 billion yuan of stock in the domestic market this year, according to State Information Center, which is controlled by State Council.

"The share sale should find favor with [local] investors as power companies, like infrastructure stocks, offer stable returns," said Fang Binyin, a trader at Guotai Junan Securities Co.

China National Petroleum Corp, the country's largest oil producer, China National Nuclear Corp and Huaneng Power International Power Development Corp will each invest 255 million yuan for a 3 percent stake in Yangtze Power.
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