As at the announcement date, HKE (Danjinghe) Wind Power Limited holds 40% equity interest of the project company holding the Danjinghe Wind Farm (the "Wind Farm") in Hebei in which the remaining 60% equity interest is owned by China Energy Conservation Windpower Investment Company Limited. Upon completion of the acquisition, HKE would have an effective equity interest of 10% of the project company holding the Danjinghe Wind Farm.
Commenting on the acquisition, Dr. Bruce Yung, Managing Director of HKE, said, "HKE has continued its strategic transformation into a company focusing on the investment in the field of alternative energy. This acquisition signifies a major stride towards HKE’s transformation. In addition, the PRC government has continued to provide strong supports to promote the alternative energy sector and wind energy as evidenced by setting its wind power capacity target to over 100GW by 2020 vis-a-vis the previous target of 30 GW. We believe these beneficial policies, coupled with the gradually declining equipment prices, will continue to contribute towards a conducive operating environment for HKE and the wind power generation industry as a whole. This acquisition lays a solid foundation for HKE’s future business expansion in China. HKE is currently exploring a number of wind power projects including the Kulun project in Inner Mongolia East, and projects in Heilongjiang and in the coastal cities of the Guangdong province."
The consideration of RMB 73.5 million represents about a 25% discount on the preliminary business valuation of the 10% effective equity interest of the project company holding the Danjinghe Wind Farm as at 31 October 2009, which is valued at RMB 98 million (equivalent to approximately HK$110.7 million) by an independent valuer. The consideration will be settled by the issuance of a convertible note to HKC (the "Convertible Note"). The term of the Convertible Note is 3 years and the conversion price will be the higher of (a) HK$1.0 and (b) the average closing price of HKE for five trading days following the date of announcement with a premium of 30% subject to adjustments. HKE considers the proposed settlement of the consideration by issuing interest-free Convertible Note as an appropriate and prudent way to finance the acquisition.
Danjinghe Wind Farm, which covers an area of approximately 103 sq. km. in Danjinghe, Zhangbei, Hebei Province and is approximately 300 km north of Beijing, includes a 200 megawatt capacity wind power generation plant ("the Plant"). Phase 1 of the Plant, which is part of a major wind farm designated by the National Development and Reform Commission as a showcase in China, is expected to generate approximately 85 million kilowatt-hour ("KWh") of electricity in 2009, about 10 million KWh more than initially projected. The construction of Phase 2 and Phase 3 of the Plant is ahead of schedule and the commencement of the operation will be in 2010.
Dr. Bruce Yung continued, "HKE is set to become the alternative energy flagship of HKC. HKC will continue to provide its support to HKE in developing the wind power generation and other alternative energy businesses. With the support of HKC and the favourable business environment brought forth by the central government, we are confident that HKE has immense growth potential going forward and will create satisfactory returns to our shareholders."
Mr. Eric Oei, Chief Executive of HKC added, "HKC will continue to support the development of HKE on alternative energy businesses in China and we are pleased to see the strategic transformation of HKE taking place." Other existing wind power projects operated by HKC include the Mudanjiang Wind Farm in Heilongjiang, the Siziwang Qi Phase 1 Wind Farm in Inner Mongolia and the Changma Wind Farm in Gansu Province. HKC also has an exclusive development rights to an area of 980 sq. km. in Siziwang Qi site which can be developed into a 1,000MW wind farm. The total capacity of wind farms either in operation or in construction under HKC and HKE currently stands at 660MW. HKC also owns a 40% equity interest in Shandong Linyi waste-to energy plant, a 25MW cogeneration plant with 300,000 tons annual garbage treatment capacity.
HKC (Holdings) Limited (stock code: 190) is principally engaged in property development and investment activities with a primary focus in the PRC. It is also one of the leading providers of renewable energy in the PRC, with investments in Heilongjiang, Inner Mongolia, Hebei, and Shandong provinces. HKC owns a 74.3% interest in Hong Kong Energy (Holdings) Limited. For more information, please visit the Group’s website: http://www.hkcholdings.com/ .
Hong Kong Energy (Holdings) Limited (stock code: 987) is a subsidiary of HKC (Holdings) Limited (stock code: 190), acting as HKC (Holdings) Limited’s renewable energy business arm. The Company’s primary investment is in the Lunaobao Wind Farm in Hebei, which is adjacent to HKC’s Danjinghe windfarm. HKE is also currently pursuing an investment in the Siziwang Qi Phase 2 Wind Farm in Inner Mongolia. For more information, please visit the Group’s website: http://www.hkenergy.com.hk/
