LI, Tao @ Hong Kong

The Cheung Kong Center (center), home to Cheung Kong Infrastructure Holdings Ltd, stands in the Central district of Hong Kong. A group led by Cheung Kong Infrastructure has offered $9.1 billion for lectricit de France SA’s UK power networks. Jerome Favre / Bloomberg News

Move designed to further expand Cheung Kong Infrastructure’s overseas operations

Li Ka-shing’s infrastructure and utility flagship has offered to pay around $9.1 billion to acquire lectricit de France SA’s (EDF) power networks business in the UK, in a move to further expand its overseas operations.

Cheung Kong Infrastructure Holdings Ltd (CKI) and its affiliate Hongkong Electric Holdings Ltd will each hold a 40 percent stake in a consortium that has tabled the offer for the lectricit de France assets. The Li Ka-shing Foundation will own the remaining 20 percent stake, the group said in a joint statement filed with the Hong Kong stock exchange on Friday.

lectricit de France, the biggest power producer in Europe, must formally accept the offer after the Commission of the European Union approves it, said the joint statement, which also mentioned that Paris-based lectricit de France has agreed not to discuss the business with other bidders for one year.

According to reports, Li Ka-shing’s group won the bid for the lectricit de France UK power networks, which serve about 7.8 million people in London and southeast England.

“Cheung Kong Infrastructure probably won the bid because of its experience in overseas investment,” said Kenny Tang, executive director at Redford Securities.

In addition to its investments in Hong Kong and on the mainland, Cheung Kong Infrastructure has invested in Australia, the UK, Canada, the Philippines and New Zealand. The company has businesses ranging from electricity generation to water and natural gas supply. Approximately 70 percent of its infrastructure and utility revenue for 2009 was generated by its operations in other countries, the company’s financial reports show.

In 2009 Cheung Kong sold three power plants in Guangdong and Jilin provinces to its affiliate Hongkong Electric. In recent years, both companies have tried to invest more in other countries to expand their sources of revenue and help balance the difficulties of trying to expand locally.

“If the group is able to seal the deal, we could expect a better return rate from Cheung Kong Infrastructure – maybe as much as 15 percent – this year, said Tang. This would be good, since the investment return of utility firms, like power suppliers, is always capped at certain levels, Tang explained.

Hongkong Electric, the second largest power supplier in Hong Kong, posted a 17 percent drop in profit in 2009, after the Hong Kong government cut power suppliers’ permitted rate of return to 9.99 percent, from the previous 13.5 to 15 percent, when it renewed their 15-year operating permits in January 2008.

Cheung Kong, on the other hand, posted a 26 percent growth in its net profit for 2009, made possible by the strong performance of its mainland and overseas operations, and a one-time gain from assets disposal. The company’s net profit for the first half of 2010 declined 48 percent year-on-year because of the absence of one-off gains.

The Cheung Kong share price has fallen 2.2 percent, while that of Hongkong Electric has risen by 11.7 percent this year, compared with a 4.4 percent decline in the benchmark Hang Seng Index.

China Daily

(HK Edition 07/31/2010 page2)

http://www.chinadaily.com.cn/hkedition/2010-07/31/content_11075260.htm