* HK Electric Investments trust to list on Jan. 29
* Trust expected to pay annualised yield of 5.5 pct-7.26 pct
* IPO could raise up to $5.7 bln
By Elzio Barreto and Donny Kwok
HONG KONG, Dec 16 Li Ka-shing's Power Assets
Holdings Ltd expects to list its Hong Kong electricity
business next month, providing the group with a cash injection
of up to $5.7 billion for overseas takeovers.
Power Assets will spin off the business into HK Electric
Investments, a single-investment trust, with the listing slated
for Jan. 29, the company said in a securities filing late on
As part of the spin-off, Power Assets expects to receive at
least HK$55.7 billion ($7.2 billion) by disposing Hongkong
Electric Company Ltd into the trust. The deal "will enable the
Company to continue to pursue new acquisitions in the global
power industry, while maintaining a strong financial profile,"
Power Assets said in the filing.
Li, Asia's wealthiest person, built an empire by buying and
selling companies across the globe. In the last few years, Li
has been selling Asian assets and buying power and
infrastructure businesses in Europe and other developed markets.
In June, a consortium of companies controlled by Li bought
Dutch waste management company AVR-Afvalverwerking B.V. for
$1.25 billion. In July last year, a consortium led by Cheung
Kong Infrastructure Holdings Ltd (CKI) - controlled by
Li's Hutchison Whampoa Ltd - agreed to buy British gas
company Wales and West Utilities for $1 billion.
CKI in January bought New Zealand waste management business
EnviroWaste for $403 million, following Hutchison Whampoa's 1.7
billion deal, including debt, for Orange Austria
Telecommunications GmbH last year.
The initial public offering of HK Electric Investments could
raise as much as $5.7 billion, based on an expected market
valuation of between HK$48 billion and HK$63.4 billion. Power
Assets expects to own 30 percent to 49.9 percent of the trust,
with the remainder sold in the market.
The IPO will be only the third in the city by a
single-investment trust, following HKT Trust, spun off
from telecoms group PCCW Ltd, and hotel owner Langham
Hospitality Investments Ltd.
The trust could pay an annualised distribution yield of 5.5
percent to 7.26 percent, Power Assets said. That compares with
7.7 percent for Langham Hospitality and 6.2 percent for HKT
"It can be attractive if the yield is more than 7 percent,"
said Alex Wong, a director at Ample Finance Group. "Anything
less than 7 percent is not attractive for investors if you take
into consideration that you are investing in a no-growth
business and that the business is facing risk that the permitted
profitability will be regulated in future."
Like most power generators and distributors, Hongkong
Electric Company operates as a regulated utility, its tariffs
and level of earnings regulated by the Hong Kong government.
"We take a bearish view on this segment and the yield has to
be attractive before it can lure investors' interest," Wong
Power Assets forecast the trust's consolidated profit
attributable to shareholder equity of at least HK$5.18 billion
for the year ending December 2013, falling to at least HK$2.77
billion for year ending December 2014.