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Power Producer to Break up
China is to break up the power generating assets of its largest State-run power producer into several companies to compete nationwide.
The power conglomerate will thus become the sole grid operator and is likely to seek overseas listing.
The move, as part of the ongoing national power reform, is expected to break up the virtual monopoly of the State Power Corp (SP), which controls nearly half of the generation assets and all the country's high-voltage grid assets.
According to Wang Jun, director of the Power Department of the State Development Planning Commission, each proposed power company, instead of controlling total generation assets in certain areas, will take a stake in separated power plants to avoid a monopoly in any region.
"These separated power plants will be merged, purchased or listed on the stock market gradually, to offload the State's shares in a bid to further stimulate competition," Wang said.
"A raft of power company listings is foreseeable," he added.
Thomas Wang, marketing and Communications Manager of Nexans, which is the No 2 cable manufacturer, said the company is hoping to see a fair and transparent environment established in the power sector as the reforms are unveiled.
"The reform will attract more foreign capital into the sector," Wang said.
According to Hu Angang, director of the Research Centre for China Study under the Chinese Academy of Sciences, the power sector, one of the nation's largest industries, holds total assets of some 800 billion yuan (US$96.4 billion), equivalent to one sixth of all State-owned assets.
If the State reduces half of its shares, it can cash in 300-400 billion yuan (US$36.1-48.2 billion) to supply the social security fund, Hu said.
Assets trading in the sector has been suspended since late last year until the reform plans were released.
Wang said the SP may retain some power plants for balancing power consumption peaks and troughs and for the sake of national security.
An official close to the drafting panel said the company will retain exclusive control over power grids and will probably seek an overseas flotation.
Presently, the company's exclusive power transmission rights and ownership of half of China's power plants make it difficult for other independent power plants to compete even though their price of electricity is relatively lower.
Premier Zhu Rongji told the National People's Congress last month that China will push on with reforms launched in late 1999 by allowing power grids and plants to operate separately and easing grips on wholesale electricity rates, now almost all set by the State.
A trial separation of plants and grids was launched in Shanghai Municipality, Shan-dong, Zhejiang, Heilongjiang, Jilin and Liaoning provinces early last year.
Power plants will bid through a computerized auction system to supply power to the grid.
Source: China Daily
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