China’s state-backed SDIC Power hires banks for $1b London IPO

Power grids. Photo: Fré Sonneveld/unsplash

China’s state-backed energy firm SDIC Power Holdings has hired a pool of three banks to list in London via the newly-minted Stock Connect scheme, three sources told Reuters, a boost for Britain’s status as a financial centre ahead of Brexit.

Goldman Sachs, HSBC and UBS are leading the transaction as global coordinators, two of the sources said, which could be launched in the second half of this year depending on market conditions.

SDIC Power, with a market value of 57 billion renminbi ($8.3 billion) in Shanghai, is looking to raise between $500 million and $1 billion from the sale of Global Depositary Receipts (GDRs) on the London Stock Exchange, one of the sources said.

SDIC did not immediately respond to an emailed request for comment outside of regular business hours in China.

Goldman Sachs and UBS declined to comment while HSBC was not available to comment.

China’s State Development & Investment Corp has a 49.1% stake in the company, while another 36.8% is listed on the Shanghai Stock Exchange, according to Refinitiv data.

SDIC‘s second biggest shareholder, China Yangtze Power Co -which has a 7.79% stake – is also state-owned.

The company, which focuses on investing, constructing and operating electric power plants, has a presence in Britain through its ownership of Red Rock Power, a Scotland-based wind farm operator.

It is also involved in other alternative energy generation such as hydropower, thermal, wind and photovoltaic.

On July 3, SDIC said its board approved a resolution to sell its GDRs in London.

Last month, Chinese brokerage Huatai Securities became the first company to list in London under the much-anticipated Stock Connect link with the Shanghai exchange.

There have been concerns that not many companies would follow Huatai to London, but one of the sources said at least three or four Chinese companies have sent out “requests for proposals” to law firms and banks who may be interested in advisory roles on listings.

The source also said SDIC‘s plans are the most advanced as the company has obtained board approval for the listing and appointed banks to handle the process.

Under the London-Shanghai Stock Connect scheme, Chinese companies can list depositary receipts pegged to their Shanghai-listed shares, while British companies can issue shares on the Shanghai Stock Exchange.

Talks on the Stock Connect scheme began in 2015, but it went live only this year, coinciding with Britain’s efforts to strengthen ties with non-European countries in financial services to make up for potential loss of business from Brexit.

Reuters