Longyuan's share of parent's renewables to increase further

    S&P Global Ratings said today that the strategic importance of China Longyuan Power Group Corp. Ltd. (00916) (A-/Stable/--) to its parent has been highlighted by moves to rationalize the development of the group's renewables across different platforms. Renewables is one of the eight strategic sectors established by the parent, China Energy Investment Corp. Ltd. (CHN Energy).
  First, CHN Energy plans for Longyuan to merge with and absorb its sister company, Inner Mongolia Pingzhuang Energy Co. Ltd. (Pingzhuang). It then proposes to list Longyuan on Shenzhen's "A-share" market. And finally, the parent intends to inject wind renewable assets into Longyuan.
  The injection of 2 gigawatt wind capacity underpins CHN Energy's efforts to single out Longyuan as a listed subsidiary for renewables, the credit rating agency believes. The move adds 8.9% to the company's 22.3GW installed capacity as of June 2020. The 2GW is of good quality with utilization hours averaging 2,382 in 2019, 9% higher than the current threshold.
  S&P expects Longyuan's share of CHN Energy's renewables to increase further over the next few years, solidifying the subsidiary's status to the group. It estimated that last year Longyuan held more than 50%-60% of the group's renewables by capacity or generation, dominated by wind power; the rest mostly resides at non-listed subsidiaries. Longyuan has a goal to double its renewable capacity to 40GW by the end of 2025, faster than in the prior five years.
  Longyuan's proposed A-share listing should enhance the company's financial flexibility, S&P noted, and that's important for asset-heavy renewable developers. Longyuan is also listed on the Hong Kong stock exchange. The dual listing has positive credit implications because selective equity-raising could defray high capital expenditure associated with the company's ambitious capacity addition goals for the next five years. The proposed listing in China was not surprising since a number of domestic renewable firms have delisted from Hong Kong because of subpar valuations.