US financial giant JP Morgan has been selected as the lead underwriter and global coordinator for the overseas IPO (initial public offering) arrangement of Shenzhen Energy Group, one of the city's largest and most profitable state-owned enterprises.

This is the first official announcement, made through two local government-backed newspapers, confirming market speculation that Shenzhen Energy Group will seek an overseas listing.

The government invited eight strong investment banks and financial institutions from home and abroad to bid for the project, rather than the widely accepted one-on-one negotiation, on February 25. The move aims to ensure transparency, justice and fairness, according to a report by Shenzhen Special Zone Daily.

The eight big names include Morgan Stanley, JP Morgan, Deutsche Bank AG, BOC International, Citibank, Goldman Sachs, UBS and China Capital Investment (Group) Co. The first five accepted the bidding invitation.

JP Morgan won the project in the first round after five of the nine-member appraisal committee, which was formed by government officials and experts, voted for the firm.

"We have set the criteria in five areas to decide the winner, such as how they evaluate the energy group, whether they could attract international institutional investors faithful to the company, considerations for proper IPO timing as well as their experiences," an official with the city's reform and development office was quoted as saying in the report.

Shenzhen Energy, which controls about three-quarters of the city's installed electricity capacity, is planning an IPO in Hong Kong that could raise about US$500 million, according to a source close to the company. Its listing could take place by the end of this year.

It will be the first Hong Kong-listed state-owned enterprise from the city in the past decade since Shenzhen Expressway's successful IPO in 1994.

Huaneng Power, China's biggest independent power producer, bought 25 percent of Shenzhen Energy last year for 2.39 billion yuan (US$288 million) through an international bidding process. The rest of the company's shares are held by the local government.

(China Daily March 11, 2004)