Tue, Aug 16, 2005 page11

• Taipower looks overseas for more investor interest

  PRIVATIZATION Selling off more than one-half of the state-owned giant to the private sector is going to take time, and overseas investors will play an important role

  • BLOOMBERG
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  Taiwan may sell as much as 25 percent of Taiwan Power Co (Taipower, 台電), the nation's biggest power producer, on overseas share markets, raising funds to narrow the government's budget deficit and increasing the company's independence.

  The government will need to involve investors abroad because the value of the stake it plans to sell is too large for the domestic market to absorb, Taipower president Edward Chen (陳貴明) said.

  He didn't say when the first shares may be sold.

  "Issuance of depositary receipts is a must," Chen said in a report presented to a forum on privatization in Taipei yesterday.

  Taipower will also seek "strategic investors" that can help improve efficiency, he said, without naming potential partners.

  The government, which owns 97 percent of Taipower, had planned to cut its stake to less than half by the end of the year.

  Selling shares in the utility would help plug the nation's budget deficit, projected to reach a record NT$334.7 billion (US$10.5 billion) this year.

  Reducing state ownership to less than 50 percent frees companies from having lawmakers control their budgets and from obligations to meet civil-servant benefits for employees.

  The government may also dispose of as much as 8 percent of Taipower in share sales to the public, Chen said.

  The year-end goal of privatizing Taipower is unlikely to be met, and it may take more than six years and several share sales to reduce state ownership to less than 50 percent, Chen said.

  The sale of Taipower's shares may be one of the nation's largest. The utility, which generates about 75 percent of the country's electricity and is its only power distributor, has capital of NT$330 billion, 34 percent more than that of Taiwan Semiconductor Manufacturing Co (台積電), the biggest company by market value on the Taiwan Stock Exchange.

  The utility's assets are estimated at NT$1.3 trillion, according to Chen. That's equivalent to about 12 percent of the nation's GDP.

  The year-end target date for Taipower's privatization already reflected a delay from a previous objective of June 2001.

  Lawmakers have blocked the plan by insisting that the 40-year-old electricity laws be revised and that the legislature approve any Taipower share sale.

  "Taipower's privatization is only possible about five years after the new electricity law is passed," said Tony Tsai (蔡東松), credit analyst at Taiwan Ratings Corp (中華信評), an affiliate of Standard & Poor's. "In Taiwan, privatization is often a lengthy process, as shown by the example of Chunghwa Telecom."

  The government this month lowered its stake in Chunghwa Telecom Co (中華電信) to below 50 percent, almost five years after offering shares in the company, the nation's biggest telephone service provider, for the first time.

  Sales of the company's shares had been delayed by weak market demand and opposition from workers, who feared job losses.

  The Cabinet will send a new version of the electricity legislation to the legislature for lawmakers to review in the session starting next month, Bureau of Energy Deputy Director-General Wang Yunn-ming (王運銘) said on June 15.

  The present electricity law was enacted when Taipower was the nation's only power company. The government has since allowed the emergence of private power producers, which generate about 25 percent of the nation's electricity.
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