Zhao Xizheng, the executive tasked with upgrading China's power lines to reduce blackouts in the world's fastest-growing economy, said he is in talks with local companies to sell plants to help fund the US$72.5 billion project.

State Grid Corp. of China, which controls power transmission in 22 of the nation's 27 provinces, will sell 11 plants with 7,800 megawatts of capacity, according to a company document. The sale of power stations valued at about US$2 billion is part of a company plan to exit electricity generation and focus on improving the nation's transmission network.

"The best way to find the right buyers for our generation assets is through a bidding process monitored by the State asset sale supervision agency," said Zhao, State Grid's chief executive. "We've had initial contact with Chinese power generators."

Power cuts that disrupted production at General Motors Corp., Sony Corp. and other companies are pushing China's government to install an estimated 40,000 megawatts of capacity this year. Without investment in the electricity grid, the nation's fragmented transmission network will be unable to move surpluses of power to areas of shortage.

"The most important task now is to make sure they get the power equation right," said Vincent Chan, Hong Kong-based head of China Research at Credit Suisse First Boston. "Potential buyers may become irrational when bidding at a time of power shortage so you can imagine China has intended to introduce bidding in a well-monitored environment."

State Grid says it needs at least 600 billion yuan (US$72.5 billion) to upgrade the network. China's economy grew at an annual 9 percent rate for the past decade, increasing demand for electricity in factories and homes.

The 11 coal-fired plants represent less than a third of the generating capacity that State Grid was given during the breakup of State Power Corp. in 2002. Five power companies shared the government-owned company's remaining 150,000 megawatts of capacity.

"We haven't set ourselves any timetable" for the sale, Zhao said on the sidelines of a power conference last week.

The power plants are in northern Tianjin, Hebei and Inner Mongolia, eastern Jiangsu and central Hubei, Hunan, Shaanxi and Ningxia, according to the document.

State Grid's equity stakes account for 6,473 megawatts of capacity, according to the document. Based on a market price of US$300,000 a megawatt estimated by analysts, the sale of assets would fetch more than US$1.9 billion.

The proceeds will be used to help fund grid expansion and upgrade projects including improving transmission from areas in the west of the country, where there is a surplus of power, to eastern and southern regions such as the country's financial center of Shanghai and neighboring Zhejiang Province.

China's government wants to link grids to enable trading of power nationwide. Inter-regional transmission capacity is expected to rise from 25 gigawatts in 2005 to 55 gigawatts by 2010 and more than 100 gigawatts by 2020, according to documents prepared by State Grid earlier this year. A gigawatt is 1,000 megawatts.

The company plans to invest 34 billion yuan in the four years from 2006 in inter-regional power lines.

(Shenzhen Daily September 9, 2004)