China Huaneng Group, the country's biggest state-owned power firm, signed a 10-billion-yuan (US$1.3 billion) deal Thursday with Guangdong provincial government to buy a 24-percent stake in the state-owned Guangdong Yuedian firm.

 

According to the transfer agreement Huaneng will become the second biggest stakeholder in Yuedian after the Guangdong government. The deal marks the strongest alliance yet between Chinese power firms, say industry insiders.

 

Li Xiaopeng, group general manager, said the deal would optimize Huaneng's asset allocation in China's booming coastal areas and improve the company's profitability and competitiveness.

 

Industry insiders believe the deal will help Huaneng tap the energy potential in the manufacturing hub of Guangdong and ease power shortages in the area. Electricity consumption in Guangdong has been growing at an annual average rate of 15 percent in recent years making it difficult for local power suppliers to keep pace with the growing demand.

 

The two companies have agreed on the stake transfer in August but a price was only recently decided.

 

At the end of 2005 the installed power generation capacity of Huaneng Group accounted for 8.5 percent of the national total. The company has set an ambitious target to almost double the capacity by 2010.

 

(Xinhua News Agency December 29, 2006)