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INTERVIEW - China Three Gorges Dam plans IPO by year end

Date: 20-Feb-03
Country: CHINA
Author: Chen Aizhu

China Yangtze Power Corp (CYPC), which operates the 20.9 million kW plants, including the dam's 26 generators, can generate four times as much power as that used by the four million residents of citystate Singapore, for example.

And state-run CYPC could sell an additional 32 percent of its power assets or more within a few years of the IPO, Vice President Kou Riming told Reuters.

"The privatisation, meant to optimise our asset structure, could move beyond the current 50 percent mark as China's power market reform evolves," Kou said.

But over the short term, CYPC's parent company, the China Yangtze Three Gorges Project Development Corp, has more than enough cash to complete the controversial $22 billion project, which was begun in 1993 and is due for full operation in 2009.

"Banks were drawn by the anticipated enormous cash flows," Kou said.

CYPC aims to raise four billion yuan ($483 million) through its IPO and to reap a total of 40 billion yuan over ten years via additional stock offers and sales to institutional investors.

When in full operation, the Three Gorges project will produce 84.7 billion kilowatt hours (kWh) of electricity annually from generators built along the behemoth 185-metre-high (202-yard) dam that spans 2,039 m (2,230 yards) across the Yangtze River.

"We are talking about 25 billion yuan a year of cash flow by then," said Kou. "We will be the first Chinese firm to promise dividends with at least 50 percent cash in our prospectus for the Shanghai listing."

The first four generators are due to go online in the second half of the year and are expected to supply 5.5 billion kWh of electricity by year's end.

Kou said the price of the project's power, set at 0.25 yuan/kWh for generation and another 0.07 yuan for transmission, will undercut most thermal plants fuelled by polluting coal and petroleum.

BOOST HYDROPOWER

Kou said the project will fill about one sixteenth of China's total power capacity of 338 million kW, and will boost a nascent hydropower sector that now supplies less than 20 percent of the electricity needed in the world's most populous nation.

"The Three Gorges project will boost China's per capita power use, which is only 0.25 kW, or one twelfth of that of the United States," said Kou, a hydro-engineer by training and formerly the chief treasurer for the China Development Bank.

The project also will raise China's use of its hydropower resources to about 20 percent from 16 percent now, both levels below the 40 percent used in the United States, Kou said.

The project's estimated full electricity production capacity of 84.7 billion kWh could replace the burning of 50 million tonnes of coal each year, which could save China from a great volume of hazardous emissions, he said.

HOTLY DEBATED

First proposed in 1919 by Sun Yatsen, the founder of China's Nationalist party, the Three Gorges project was hotly debated for decades before Beijing approved it in 1992.

Critics say the dam's reservoir could harbour industrial waste and cause severe ecological damage, and could dislocate more than one million people from their homes.

"When you take a stroll by the peaceful Mississippi river, you will never understand why the Chinese want to build the dam," said Kou, who received his doctoral degree in Canada.

Each year, ferocious floods along the Yangtze hit tens of millions of people as runoff from the towering Himalaya mountains fluctuates with the seasons.

"The dam had to relocate a million people, but it could save more than ten million," he said.

To make way for the dam, China has spent about 90 billion yuan moving 1.13 million people, who used to make a living farming, fishing, making paper and cement, and mining coal in the river valley.

"Most of them are now living in brand-new towns around the dam reservoir area. Instead of farming or working at highly polluting paper mills, they are now barbers or workers at new modern plants."

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