Nanshan Power in talks to buy gas-fired plant-source

SINGAPORE - - Chinese electricity producer Shenzhen Nanshan Power Station Co Ltd is in talks to buy a controlling stake in a natural gas power plant in the southern island province of Hainan, a source close to the talks said recently.

Shenzhen Nanshan aims to tap China's burgeoning demand for natural gas through the acquisition of the Sanya Nanshan Power Plant, which will be expanded to transmit electricity to the power-starved province of Guangdong, the source told Reuters.

But state-owned giant Huaneng Group is vying with Shenzhen Nanshan to acquire Sanya Nanshan, which is jointly owned by the Hainan provincial government and a domestic private enterprise, he added.

"It is not certain who will win the deal, which is expected to be concluded later this year," said the source, who asked not to be identified. Beijing-based Huaneng Group is the parent company of Hong Kong and New York-listed Huaneng Power International Inc.

Shenzhen Nanshan Power Station, which has generators in Guangdong and the eastern province of Anhui, has hard currency B-shares listed on the Shenzhen stock exchange. The shares are fully available to overseas investors. The stock, with a total market capitalisation of $946 million, has gained 39 percent in the past six months, making it the best-performing power share listed in Shenzhen, next to Hong Kong.

Sanya Nanshan Power Plant, located in the resort city of Sanya, has operated for several years, the source said. It uses natural gas provided by CNOOC Group, the parent of dominant Chinese offshore oil and gas producer CNOOC Ltd, from its gas fields in the South China sea.

The source gave no further details. China is spending billions of dollars on pipelines, gas-fired power stations and liquefied natural gas ports to boost natural gas to eight percent of its energy mix by 2010, from less than three percent now, to cut consumption of environmentally damaging coal.