Shares in group linked to China’s Three Gorges Dam surge on debut

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China Three Gorges Renewables Group’s stock surged by 44 per cent on its debut after the company raised $3.6bn in China’s largest initial public offering of 2021.

Shares in the renewable energy arm of China Three Gorges Corp, the state-owned company that lends its name to the hydropower dam on the Yangtze river, shot up the maximum daily amount permitted by the Shanghai stock exchange on Thursday.

The group raised Rmb22.7bn ($3.6bn) in its IPO, the largest equity debut in the country since a $7.6bn share sale by China’s biggest chipmaker, Semiconductor Manufacturing International Corporation, last July. The first day jump pushed the company’s market capitalisation to $17.1bn, according to Bloomberg.

The day one pop for China Three Gorges Renewables, which also has interests in wind power, came as China faces a sharp rise in the cost of coal-fired power.

The move reflected strong appetite from Chinese investors for green energy assets as Beijing seeks to make wind a far greater contributor to the country’s electricity output, said Bruce Pang, head of research for investment bank China Renaissance.

“It’s not just a trend in China — it’s a trend across the world,” Pang said.

Demand for shares in the IPO outstripped supply 78 times, according to the company.

The group will use part of the share sale proceeds to cover almost half the cost of seven offshore wind turbine projects, as it and other renewables companies rush to complete infrastructure before government subsidies expire at the end of the year.

“We anticipate China Three Gorges will strive to finish the projects this year in order to receive the subsidies,” said Apple Li, a credit analyst at S&P Global Ratings.

The credit rating agency said this week that the IPO would provide a significant injection to the balance sheet of parent group China Three Gorges as the subsidiary pursues an “ambitious non-hydro renewables development plan” over the next few years.

China Three Gorges Renewables on Tuesday launched its first floating offshore wind power platform off the coast of Zhejiang province in south-eastern China. The company said the platform could deliver “green and clean energy for 30,000 households a year”.

Unlike fixed wind turbines, which can only operate in shallow waters, floating turbines can generate electricity further offshore, harnessing the power of stronger ocean winds. 

In September, China committed to achieving carbon neutrality by 2060, but its industry-fuelled recovery from the Covid-19 pandemic has put pressure on its environmental ambitions. In 2020, it produced record amounts of steel and increased approvals for new coal plants.

Research last year led by Wang Muyi, an analyst at UK think-tank Ember, found that new wind, hydro, solar and nuclear energy investments could not keep up with a sharp rise in electricity use in China between May and October.

The country is also suffering from a shortage of coal as industrial activity booms, pushing up prices. Last month, a state council meeting chaired by Premier Li Keqiang emphasised the need to further tap China’s “rich coal resources”, but added that the capacity of wind, solar, nuclear and hydropower would be increased to ensure energy supply this summer.

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