First Chinese Company China Three Gorges Listed on PSX

LAHORE: China Three Gorges South Asia Investment Limited (CSAIL) has planned to list its subsidiary, renewable energy company Three Gorges First (TGF) Wind Farm Private (Pvt) Limited (Ltd), on Pakistan Stock Exchange (PSX). The aim is to get this done by the second quarter of 2021.
This is going to be the first listing by any Chinese company on the Pakistan Stock Exchange.

TGF is also a major investor in CPEC projects, the listing would have been carried out in the second quarter of 2020, but owing to the pandemic and subsequent turmoil, the plans were rescheduled. The new agenda stated that TGF will be listed by 2021.

CSAIL is an investment holding company cultivated by Govt Owned China Three Gorges Corporation. TGC is the largest clean energy group in China. It is also world’s largest hydropower group in terms of owned and equity-based installed capacity. CSAIL was formed to invest in clean energy projects in the South Asian region. Their current focus is Pakistan.

The non-CPEC projects of CSAIL include the aforementioned Three Gorges First Wind Farm and 640MW Mahl Hydropower Project, also located on Jhelum River. The company is also in the process of constructing a solar hybrid power project.

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The 49.50MW TGF, worth an estimated $120 million, is 75pc debt and 25pc equity financed. It is the first wind project developed by CSAIL and is located near Jhimpir village in Thatta district of Sindh.
The project began commercial operations on November 25, 2014, and started supplying the electricity to the national grid of Pakistan.

Through this listing in Pakistan, CSAIL wants to do capacity building of its management team for the larger listing of CSAIL on the Hong Kong Stock Exchange that was announced last year.

But more importantly, sources disclosed that the main objective of making TGF public is that the Chinese government wants to dispel the impression that they overload countries with debt only. The listing will convey a message that the country [China] is willing to share the benefits of the projects with the people of the countries it is investing in.

Therefore, the listing is not going to be an IPO to raise funds from the public. Instead, it would be an offer-for-sale (OFS) to enable the general public shareholders in the project and earn stable returns.

Three Gorges’s first Wind Farm project is currently operating and giving returns while expansion continues. The agreement term of the project is for 25 years. All recoveries are in the form of the tariff agreed with the Government of Pakistan. The debt payoff period is 10 years and the project will remain in operation for another 15 years, giving stable returns.

Experts believe that the listing is going to be indicative for Pakistan as it will open avenues for similar listings in the future.
“It is an infrastructure play and that speaks volume,” said KASB Securities Managing Director Arsalan Asif Soomro. “Secondly, if the precedent is set and the market reacts positively, that would be very handy for the government. We might be able to see a lot of government infrastructure projects of similar nature being listed eventually on the exchange,” he added.

“This listing will increase the breadth and options of the stock market,” said Soomro.
“The listing is going to be a positive development for Pakistan and will strengthen investor confidence. More such listings can be expected if this one goes well and that would augur well for the stock market and eventually the country,” said Adnan Sami Sheikh, the Vice President of Research to Pakistan Kuwait Investment Company.

Umer Atiq
IT Consultant and business analyst. Keeps an interest in the affair that impact business or society.