nuclear-news

China’s nuclear power investment might not be such a good deal

China Nuclear IPO Risks Fading Afterglow  By ABHEEK BHATTACHARYA, WSJ  Nov. 24, 2014 China’s largest nuclear power company is coming to the table with a high minimum bet.

State-owned CGN Power plans to sell shares worth up to $3.16 billionin Hong Kong this week, making it one of the few pure-play listed nuclear companies in the world. ………

CGN Power’s multiple is substantially higher than U.S. nuclear operator Exelon ’s 6.7 times and French EDF’s 4.9 times. It is also more expensive than CGN Meiya, CGN Power’s smaller affiliate that went public in September and that fetches 11.2 times Ebitda.

High valuations for CGN Power are dicey because China regulates electricity prices more heavily than in the West. For instance, new nuclear-power plants can’t charge higher tariffs than neighboring coal-fired power, capping earnings potential.

Though Beijing’s plans to cut back on fossil fuels will help growth, the state-run grids prioritize wind and solar over nuclear power when buying and dispatching electricity, according to CGN’s prospectus. Given China’s ambitions to build out solar power, this means nuclear could occasionally lose out. It is also a reminder that nuclear energy may not always enjoy the government’s graces.

CGN Power’s novelty may attract some betting on China’s nuclear future. Yet like many Hong Kong IPOs that do well at first, this bet may lose its afterglow. http://online.wsj.com/articles/china-nuclear-ipo-risks-fading-afterglow-heard-on-the-street-1416819232

November 26, 2014 - Posted by Christina Macpherson | business and costs, China