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Power Giant to Issue 5 Billion Yuan Bonds

The State Grid Corp, the nation's largest power transmission operator, will issue 10-year corporate bonds to raise 5 billion yuan (US$604.5 million) to fund the construction of grid networks.

The company also said Tuesday it will issue corporate bonds to collect up to 8 billion yuan (US$967.3 million) annually in coming years to finance the construction of transmission lines and grid networks.

The bond issue partly reflects the nation's push to expedite the development of new power generators and grids, amid a widespread electricity crunch.

State Grid is to sell 3 billion yuan (US$362.7 million) in bonds with a fixed coupon of 4.61 percent, plus 2 billion yuan (US$121 million) in floating rate bonds from today to January 14.

The coupon on the floating rate bonds is 1.75 percentage points above China's one-year bank deposit rate of 1.98 percent.

The proceeds will fund the connection of scattered regional grids to form an integrated national network, power transmissions from power-rich western regions to energy-starving eastern areas, and construction of regional power grids, and hydropower stations, the company said in a statement.

"The projects have good profit returns and social benefits," it said

It is the third time this month that generating and grid companies have manoeuvred to raise capital from the bond market.

China Huaneng Group, and China Power Investment Group -- two of the nation's largest generating firms -- raised money earlier this month to back the construction of power stations.

"Power companies are seeking funds to accelerate the construction of power plants and grids,'' said an analyst with Shenzhen-based Great Wall Securities Co Ltd.

More than half of China's territory has been saddled with an electricity shortfall this year, with tens of millions of residents and enterprises being plunged into blackouts and others facing rations.

According to the State Grid Corp, the electricity situation will deteriorate further next year and more areas will be cast into darkness.

The company predicted China's electricity consumption will grow to nearly 2,100 billion kilowatthours in 2004, up 11 percent over this year.

Commenting on State Grid's bond issue, the analyst said the timing of the move is not desirable with market expectation that the government will raise the interest rate.

"But the bond is of low risk, given the strong cash flow of State Corp," he said.

(China Daily December 31, 2003)

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