Jan 08, 2020 (China Knowledge) - A world-renowned integrated equipment manufacturing company, Shanghai Electric Group (601727) (2727) has, over a decade ago, been making wind turbines that are not only environmental-friendly but sustainable in future green development. The giant power equipment maker with annual operating revenue exceeding RMB 100 billion has just announced to spin off its wind power business for initial public offering (IPO) to better focus on sustainable and green wind turbines and related equipment business.
Yesterday, Shanghai Electric Group officially announced and has filed its plan to the Shanghai Stock Exchange to spin off its subsidiary, Shanghai Electric Wind Power Group, to list it on the Science and Technology Innovation Board, also known as the STAR Market.
The STAR Market is a NASDAQ-style high-tech board launched on the Shanghai Stock Exchange (SSE) last July, and saw 70 IPOs listed to date. The board focuses on companies in high-tech and strategically emerging sectors such as high-level IT technology, advanced equipment, new materials, new energy and biotechnology.
This marks the second time such spin-off has been officially announced by a listed company in China, with the first being state-owned China Railway Construction Corp, which similarly managed to spin-off its subsidiary China Railway Construction Heavy Industry and listed on the STAR Market.
Established in 2006 with a registered capital of RMB 800 mln, Shanghai Electric Wind Power belongs to the new energy and environmental-friendly equipment business under the group. The group directly holds 99% of the shares in the subsidiary company, and indirectly holds the remaining 1% of shares through another wholly-owned subsidiary Shanghai Electric Global Investment.
Shanghai Electric Wind Power is currently one of the leading key enterprises of new and clean energy in China. It is the largest offshore wind turbine manufacturer, as well as one of the biggest onshore wind turbine manufacturers in the country. The total installed capacity of onshore and offshore wind turbines of the company combined reached 1.14 mln kW in 2018.
According to a statistics report published by China Renewable Energy Society, the offshore installed capacity of Shanghai Electric Wind Power was 588,000 kW in 2017, ranking first in China. In 2018, despite seven other manufacturers increasing the capacity of their offshore installations, Shanghai Electric Wind Power remained the largest, accounting for 43.9% of total installed offshore capacity.
With leading wind power design capabilities in key equipment and parts, Shanghai Electric Wind Power is able to leverage on these advantages to achieve full power coverage. It currently has full independent intellectual property rights for its onshore products. Moreover, through strategic cooperation and independent research and development, it boasts one of the best offshore wind power manufacturing technology and operation and maintenance capabilities in the world.
As of Sep 30, 2019, the total assets of Shanghai Electric Wind Power recorded RMB 16.57 bln, with a net asset of RMB 3.74 bln. The operating revenue was RMB 4.9 bln, achieving a net profit of RMB 100 mln. This compares to operating revenue of RMB 6.17 bln and RMB 6.56 bln in 2017 and 2018, respectively.
After completion of the spin-off, Shanghai Electric Wind Power could exercise mergers and acquisitions in its industry, as well as linking up with strategic investors. Furthermore, it is expected that the listed entity can also further develop core and cutting-edge technologies in wind power, maintain the innovation vitality of its wind power business and enhance its profitability and market competitiveness.
In addition, the IPO will improve the financial efficiency of Shanghai Electric Wind Power by establishing direct access with the capital market so as to broaden the financing channels of the company.
After the listing, Shanghai Electric will retain full control over the subsidiary and continue to include the latter in its consolidated financial statements. With Shanghai Electric Wind Power’s share prices likely to increase in the future, the listing is also expected to improve Shanghai Electric’s overall business performance, profitability and liquidity in the long run.
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