Wind Play Huaneng Renewables Plummets on HK Debut

Huaneng Renewables, the wind power unit of China’s top power group, tumbled more than 11 percent in its trading debut on Friday, after raising $800 million in its revived initial public offering that had been pulled last year due to weak investor sentiment.

Huaneng Renewables [0958.HK  2.40    0.14 (+6.11%)   ], China’s No. 3 wind company, scrapped its original $1.3 billion IPO in December as a stalemate at UN climate talks and worries over the outlook for the Chinese wind sector dampened buying momentum.

The wind firm’s listing, five months later, comes as concerns over a looming overcapacity in the solar sector and transmission line problems at wind farms in China blunt strong long-term demand for renewables due to the rising price of key commodities such as oil and coal and a boom in China’s clean energy demand.

Analysts said Huaneng Renewables poor performance was likely attributed to worries over China potentially raising interest rates in the near term.

“The risk of the sector has always been that they are quite sensitive to interest rates. There are worries that the government will raise or continue to tighten,” said Edwin Pang, analyst at Credit Suisse in Hong Kong, citing the economic data due next week as a potential trigger.

“Huaneng and Datang, their sensitivity to interest rates is pretty high. A 25 basis point rise could be a 10 percent earnings kind of impact because gearing levels are 70-30 for any wind farm,” he said.

Larger rivals have dropped since the start of June with Datang Renewables[1798.HK  2.01    -0.02  (-0.99%)   ] sliding 12 percent and Longyuan [0916.HK  7.71   -0.24  (-3.01%)   ] down 6 percent.

Huaneng Renewables, backed by cornerstone investors including Chinese sovereign wealth fund China Investment Corp, Singapore’s Temasek Holdings, and GE Capital, was 7 percent lower by 0337 GMT.

The company is using 40 percent of the IPO proceeds to fund expansion in China, with a quarter of the proceeds to invest in wind power projects overseas.

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