Huadian embarks on overseas acquisition trail

Huadian Corp charts ambitious plan to be an international player, reports Lan Lan.

After making their first overseas clean energy asset acquisition at the end of last year, officials at Huadian Corp－China's largest natural gas-fired electricity provider and a Fortune 500 company－said the organization is firmly on the lookout for other foreign targets.

One of China's five largest State-owned electricity providers with total installed generating capacity of 123 gigawatts at the end of 2014, Huadian bought full control of a 28-mW wind farm in Barchín del Hoyo in Spain from Elecdey Barchín SA.

Fu Weixiong, director of its international business department, told China Daily that after completing overseas trade contracts worth about 1 billion yuan ($161 million) in 2014, the group is eyeing opportunities in both renewable energy and conventional oil and natural gas assets, with an overall strategy of transforming the business from being an electricity producer into a comprehensive energy group.

"Europe has been a pioneer in renewable capacity installation, but some companies are facing operational difficulties such as a lack of cash flow or high debts caused by the sluggish economic recovery, and this is creating a window of opportunity for overseas acquisitions," he said.

Fu's target is to grow its foreign holdings fivefold, so they make up one-10th of its business by 2020.

Huadian's total assets were worth 720 billion yuan at the end of last year.

The company was ranked 368th in the Fortune 500 in 2013.

Future oil and natural gas acquisitions are a strategic priority for Huadian－the only one of the five State-owned electricity providers so far to invest in a natural gas business, said Fu, adding the company is in discussions with several oil and liquefied natural gas suppliers in North America, although he declined to give details because of confidentiality issues. It also won the country's second shale gas auction in late 2012.

Huadian is China's largest natural gas-fired electricity provider with an installed generating capacity of 7,975 mW at the end of 2014.

The other four State-owned power producers are China Huaneng Group, China Guodian Corp, China Datang Corp and China Power Investment Corp.

Huadian and China Petroleum & Chemical Corp, known as Sinopec, jointly acquired a 15 percent stake in the Canada-based Pacific Northwest liquefied natural gas project in May 2014. Huadian's 5 percent stake secured it an annual 600,000 metric ton supply of LNG, its first overseas source of gas to support its domestic LNG power generation projects.

British Columbia-based PNW's liquefied natural gas is sourced from Progress Energy Canada Ltd's North Montney assets, of which Petronas of Malaysia is the majority owner and project operator. The project is expected to complete two production lines, each delivering 6 million tons of LNG annually by the end of 2018.

Huadian has also won contracts to build a number of coal-fired power plants and hydropower plants in Asia and Central and Eastern Europe, which bring its total overseas power capacity already operating or being built to more than 1,500 mW. The total capacity of its approved projects expected to start construction is around 2,640 mW.

Energy industry analysts said that China's home-grown power technology has improved unrecognizably over the past two decades, in terms of sophistication and efficiency, and environmentally.

As a result, much like its high-speed rail technology, international interest and demand for it are growing, helped in no small part by what Chinese energy technology costs compared to others on the international market.

Fu said, for example, that some major power equipment purchased in China could be 30 percent cheaper than in Europe.