September 25, 2011 / 1:00 PM / 8 years ago

China's Sinohydro aims to raise $2.6 billion in Shanghai IPO

SHANGHAI (Reuters) - Sinohydro Group, China’s largest builder of dams, aims to raise as much as 16.8 billion yuan ($2.6 billion) in mainland China, testing investor appetite in a sluggish market.

The builder of the Three Gorges Dam, the world’s largest hydropower project, has set a price range of 4.50-4.80 yuan a share for the issue, Sinohydro said in a statement to the Shanghai Stock Exchange late on Sunday.

The price range, which translates to 15-16 times 2010 earnings, was in line with expectations.

CICC pegged the fair value of Sinohydro, which will trade on the Shanghai exchange as (601699.SS), at 4.3-5.8 yuan a share.

Hong Yuan Securities pegged the fair value of the company at 5.0-6.3 yuan a share and recommended clients subscribe to the shares at 4.25-5.36 yuan a share.

Sinohydro plans to issue up to 3.5 billion yuan-denominated A shares as it needs 17.3 billion yuan ($2.7 billion) to buy new equipment, supplement working capital and fund four clean energy and infrastructure projects, including one in Cambodia, it said in a prospectus.

It will be the first major deal in mainland China’s IPO market this year, which has been dominated by small deals, since wind turbine maker Sinovel Wind’s (601558.SS) 9.5 billion yuan offering in January.

China’s stock index hovers near a 14-month low as growth in the world’s second-largest economy slows amid worries that the debt crisis in Europe will hit global demand.

The benchmark Shanghai Composite Index .SSEC has fallen 13 percent so far this year. Shares of China Gezhouba Group (600068.SS), which competes with Sinohydro, have dropped 25.5 percent this year.

China has budgeted 2 trillion yuan for hydropower and water infrastructure projects over the next five years.

“Sinohydro is the biggest beneficiary of China’s efforts to step up investments on hydropower and water infrastructure,” said CICC analysts Zhang Song and Wu Huimin in a research report last week (Sept 20).

The company controls more than two-thirds of the Chinese dam market.

As part of an overseas expansion drive, Sinohydro has taken on projects in Malaysia, Sudan, Laos and Ghana, the company says on its website.

It is also involved in other infrastructure projects, including the recently launched Beijing-Shanghai high-speed rail link, according to the website.

Sinohydro Corp posted operating revenue of 101 billion yuan and net profit of 2.91 billion yuan in 2010.

China Securities Co. and Bank of China International are the lead underwriters for the listing.

Reporting by Soo Ai Peng; Editing by Ed Lane

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