CGN Power sizzles on HK debut

He Yu, chairman of China General Nuclear Power Group, poses for a photograph during CGN Power Co's listing ceremony at the Hong Kong stock exchange, on Dec 10, 2014. CGN Power shares surged on debut as investors remained optimistic on sustained growth prospects for the company. [Photo/Agencies]

World's first pure play on nuclear generation sparks investor frenzy

Shares of CGN Power Co Ltd, China's largest nuclear plant operator in terms of installed capacity, surged in their Hong Kong trading debut on Wednesday as investors rushed to cash in on the huge growth prospects for the sector.

CGN Power shares rose 25 percent to an intra-day high of HK$3.48 (45 cents) before ending the day at HK$3.31. The company, a subsidiary of China General Nuclear Power Group, issued 8.83 billion shares at HK$2.78, the top end of its price range, making it the biggest initial public offering in the last two years in Hong Kong.

The company had in a regulatory filing indicated that it would use the IPO funds to acquire a stake in the Taishan nuclear power station, owned by its parent CGN.

The enthusiastic response from investors came as China, the world's largest energy consumer, unveiled plans to build more nuclear power plants as part of its efforts to use more non-fossil fuels in its energy mix to reduce emissions.

Liu Baohua, head of the nuclear power division of the National Energy Administration, told reporters earlier this month that the country will accelerate approvals for nuclear power projects in coastal regions, but declined to indicate which project would be the first off the mark.

"China is well on its way to become 'a strong country' for nuclear power from a 'big nuclear country'," he said.

CGN and other nuclear power firms are developing third-generation nuclear technologies with independent property rights known as CAP1400 based on Westinghouse's AP1000 technology and Hualong One, China's first homegrown nuclear power plant.

But Liu said the nuclear power sector will have to deal with certain problems while developing the advanced third-generation nuclear technology as some of the key nuclear reactor components such as coolant pumps are not up to date with the present standards.

Due to huge expense involved in building a nuclear power plant, the government has encouraged private capital to enter the industry.

CGN Power is not only the first Chinese nuclear company to go public, but also the first listed pure nuclear power asset in the world. Other global electricity utilities, like French energy giant EDF, included power generation assets not related to nuclear when going for an IPO.

Experts said the real charm of CGN Power's listing is its pure nuclear nature as it provides an accurate assessment of the huge potential in the sector.

Chen Yingjie, a senior analyst at Phillip Securities, said a nuclear power station can operate day and night for about 8,000 hours per year－a capacity that other sources of fuel are not able to compete with, not even for a thermal power station that can work for 4,500 hours every year.

"China's nuclear sector has a huge potential for growth and this has helped boost CGN Power shares. The shares may see further appreciation," he said.

China aims to raise installed nuclear capacity from 14.6 gigawatts in 2013 to 50 gW by the end of 2017. Among all types of clean energy, only solar power is expected to see rapid growth.

There are 21 nuclear reactors in operation at eight sites and 27 under construction in China, the largest number of nuclear power plants in the world, according to the NEA.