Privatization Of Hong Kong Stock New Energy Company In Central Electric Power Enterprises: Revaluation Of A Valuation That Can No Longer Wait

In contrast with NetEase, Jingdong and other Chinese stocks, they are coming to Hong Kong exchange in recent days.

A few days ago, 00816.HK announced that the Fujian Huadian Power Energy Developments Ltd (hereinafter referred to as "Fujian Huadian Furui"), which was set up by Huadian Group, as the offeror, will absorb and merge at a price of HK $2.50 per share. Upon completion, it will apply for the cancellation of the new market position of Huadian Fuxin H. Ownership structure shows that Huadian Group directly owns more than 60% of Huadian's Fuxin Company.

At this point, the power of China's clean energy (00735.HK), Huaneng Group's Huaneng new energy (00958.HK) to complete the privatization of delisting under the banner of China's household appliances, and the announcement of privatization of China Guangdong Nuclear Power's new energy (01811.HK) of the central Guangdong Nuclear Power Group (New Energy Company) joined another privatization of the central power company's New Energy Company.

A senior analyst with a new energy industry who declined to be named told the twenty-first Century business news reporter that the low valuation and the lack of refinancing function became the direct inducement of the privatization of many Hong Kong Stock Companies in recent years. Prior to the successful privatization of Huaneng's new energy, the delisting will become the benchmark, which will affect the New Energy Company's willingness to stay down.

Why is valuations low?

"No longer wait", or the general mentality of the listed companies of the new energy Hong Kong stock listed by the central electric power company when they re evaluate their listing status value.

It is undeniable that the capital adequacy of Hong Kong stocks and the convenience of refinancing are important reasons for attracting frequent listing of these companies in Hong Kong several years ago. On the one hand, Hong Kong stocks show strong affordability to IPO financing of high quality companies, so that many companies will get considerable financing when they first come public. On the other hand, abundant refinancing channels are a guarantee for New Energy Company in capital intensive industries.

But in recent years, the gradual loss of refinancing function has caused Hong Kong stock New Energy Company to be in an awkward position. A set of data can illustrate this phenomenon. In response, the twenty-first Century economic news reporter selected five New Energy Company listed in Hong Kong for comparison (including delisting, see chart).

It belongs to five new energy enterprises of several major power energy central enterprises group, which raised a higher amount of financing in the first round, but since 2018, five companies have no financing in Hong Kong stock market. Take Longyuan Power (00916.HK) as an example, the actual fund-raising of the company's listing in Hong Kong amounted to HK $20 billion 108 million. After IPO financing, Longyuan Power only raised its HK $2 billion 906 million in 2012 through rights issue, and no financing was provided. Similar situation also occurred in the 01798.HK and China Guangdong nuclear energy. After the completion of the initial fundraising, the two companies did not appear refinancing in the Hong Kong stock market.

"In recent years, the valuation of New Energy Company in Hong Kong stocks is generally low, which has become an obstacle to the company's refinancing." Aforementioned senior analysts of the new energy industry told the twenty-first Century economic news reporter that the new energy subsidies were not in place in time to become the main factors restricting the valuation of Hong Kong stock New Energy Company. However, this problem is difficult to solve in the short term, which will lead to a vicious circle of underestimation and refinancing difficulties for the Hong Kong stock New Energy Company.

New Energy Company, a central listed company listed in Hong Kong, mainly focuses on wind power and photovoltaic. In recent years, driven by the transformation of energy structure, China's new energy industry is ushering in rapid development. But the development can not be separated from policy guidance, among which subsidy policy plays an important role. However, the complex subsidy process leads to the failure to grant new energy subsidies in a timely manner.

For New Energy Company, including central enterprises, subsidies that are not in place in time will be included in the company's accounts receivable, affecting the company's financial indicators. Citibank released a research report on Longyuan Power in March this year, predicting that the company's subsidy will be charged as much as 17 billion 500 million yuan by the end of this year. In 2019, the accounts receivable of Longyuan electric power company exceeded RMB 16 billion yuan.

In addition, the long term arrears of new energy subsidies caused some enterprises to break up the capital chain, suspend production or be on the verge of collapse. Therefore, the progress of resolving the problem of subsidy delinquency has become an important reference for Hong Kong stock investors to assess the fundamentals of new energy enterprises in Hong Kong stock market.

Affected by this, Hong Kong stock New Energy Company valuation continued to decline. For example, the new trend of privatization of China Guangdong nuclear power has been disclosed. The latest dynamic P / E rate as of June 3rd was 7.6 times, while the company's first day price earnings ratio was 18.73 times. In addition, compared to the A shares Shen Wan new energy power generation plate, the overall price earnings ratio of the plate in June 3rd is 32.57 times.

The undervalued value means that the value of New Energy Company in the Hong Kong stock market, including the central enterprises, is gradually losing, and thus reduces the stock liquidity and increases the difficulty of refinancing, which may affect the unimpeded debt repayment of the company.

The new energy industry has heavy asset characteristics, and high liabilities are the inevitable financial labels of these companies. By the end of 2019, the asset liability ratios of Longyuan Power, Datang new energy, Huadian new Fuxin and China Guangdong nuclear power were 61.32%, 81.88%, 65.82% and 81.23% respectively. Among them, taking China Guangdong nuclear energy as an example, the annual interest rate of bank loans in 2019 was 1.75% to 6.62%. Among them, the floating rate loan amounted to 1 billion 924 million US dollars, accounting for 74.06%.

Where does it go after privatization?

Low valuation and loss of refinancing function are the real reasons for the intensive privatization of New Energy Company in Hong Kong stock market. But another analyst pointed out to the twenty-first Century economic news reporter that this phenomenon needs to be discussed in the context of the reform of state-owned enterprises.

According to the source, the adjustment of enterprise assessment indicators under the reform of state-owned enterprises requires the parent company or major shareholder of state-owned enterprises to play their due functions. Therefore, the parent company or major shareholder will pay more attention to the company's stock price, fundamentals and return on shareholders and other factors, and the emergence of privatization and other factors.

The process of delisting from the privatization of Hong Kong stock is not difficult. China's clean energy and Huaneng new energy have only been used for more than 5 months. But the key question is, where to go after privatization is delisted?

The former senior analyst of the new energy industry told the twenty-first Century economic news reporter that there are two ways to maximize the value of assets: the first one is to return A shares independently, and the second is to inject high-quality assets into the A share listed company system. But whether these two ways can be achieved are closely related to the smooth integration of the business after the company's return to the group.

In the privatization of Huaneng new energy, China Huaneng said, "Huaneng new energy privatization will help China Huaneng and Huaneng new energy business integration, so that China Huaneng will be more flexible, efficient and withstand any potential uncertainty from the perspective of market competition, macro environment and industry regulation in supporting the future development of Huaneng's new energy business." This means that the progress of the integration of Huaneng's new energy after its privatization will affect the possibility of the company's listing in A shares with a new look.

In fact, a major obstacle to the return of foreign companies to A shares is whether they are connected and competing with affiliated enterprises. If this obstacle is not cleared, it will be difficult to obtain a pass on the whole.

Huaneng's privatization of new energy has been out of the market for more than three months. China Huaneng's integration of its new energy business has attracted much attention. Data show that as of the end of June 2019, the total installed capacity of Huaneng new energy is 12.09GW. Among them, the installed capacity of wind power is 11.16GW, and the installed capacity of PV is 0.93GW. According to the research report issued by Guoxin Securities, the wind power installed capacity of China Huaneng at the end of 2017 is over 19GW. This indicates that China Huaneng's wind power projects are not owned by Huaneng new energy.

The integration of Huaneng new energy and group company will not be able to bypass Huaneng International (600011.SH), another A share listed company in Huaneng, China. Although Huaneng International's largest business is coal-fired power generation, but in the traditional thermal power business profits shrink year by year, the company also took the new energy business as a new profit growth point in recent years.

By the end of 2019, the wind power installed capacity of Huaneng International was 5.90GW. In addition, the company's capital expenditure plan announced in 2020 shows that it intends to invest 31 billion 577 million yuan this year in investment in wind power projects. This may lead to direct competition with Huaneng's new energy.

Therefore, if Huaneng new energy is listed on A shares, the integration of wind power assets between the two companies will become an important hurdle.

?