Background:

The State-owned Assets Supervision and Administration Commission of the People's Government of Shijiazhang (SASACPGS) signed a framework agreement, effective 7 Aug 2008, with China Power Investment Corp. on 28 Jul 2008, to transfer its stake in Shijiazhang Dongfang Thermoelectric Group Co., Ltd. to the latter.

Investment highlights:

1. The company plans to invest approximately RMB 2.8 bln to construct two 300 MW generating units with double extractions, and two 1025 t/h boilers in the first phase of a project in the Liang Village Thermal Power Plant, which is in compliance with the national policy of ‘keeping and promoting the large and holding or closing down the small’. The construction is expected to take 26 months. The company plans to invest approximately RMB 33.25 mln in a flue gas desulphurization project of the No. 4 Shijiazhuang Co-generation Power Plant.

2. Pursuant to a plan of the Shijiazhuang Municipal Government, the heating requirements of urban areas will increase from 80% in 2003 to 90% by 2010, central heating areas will increase by 35 mln s.q.m, with an annual growth rate of 13%, thus the supply will not be able to meet demand in the heating sector. The company is currently the leading central heating supplier in the province, and could possibly be the largest heating supplier in northern China in the future.

3. The company is a strong advocate of co-generation plants

Risk reminder:

The company is estimated to suffer a loss of approximately RMB 160 mln. The loss is mainly ascribed to the escalating cost of coal and government capped steam and power prices.


Source: www.topcj.com

Date: 13 Aug 2008

CN01/FL/SW/BT/KM