Shandong Huaneng Power Case
$22.5~$27.5
Needs $4.5 billion to finance the construction of new power plant
Intend to raise $700 million~$860 million, which is part of the finance of the project
Shandong Huaneng Power
First company registered in PRC to be list on NYSE
Initially issued $333 million but the market value of the issue had fallen substantially since the first day of the IPO
20 days after the IPO of Shandong Huaneng Power, the share price drop from 14.25 to 13.50
In the past: Companies in PRC funded the project themselves or relied on international debt capital
Rapid growth strained internal source of debt capital
Reforms encouraged private ownership of previously state run enterprises
Stock exchange market at that time had little capitalization and liquidity
—-BEGIN TO LOOK OUTSIDE TO FIND NEW SOURCE OF CAPITAL TO FINANCE THE GROWTH
Welcomed by several foreign stock markets made it difficult to forecast the success of the global issue
SEC decided to require 2 years audited earning of those PRC companies instead of three years
United States treat PRC very important
Listing in the United States
international exposure
more institutional investors
delay of the IPO because of the bad condition-Increase of interest rate in order to solve the inflation, which had a reverse impact on the stock market, IPOs slowed down
IPO in October-raise fund to take the charge of a plant that will be completed in December
Socialist market economy
Chinese environment at that time
Reform of economy in China
From a central planned economy to a more market oriented economy
Economic growth up to 9%
Rapid growth of economy-rise in the consumer price-inflation
After 1989,tight control on capital
Lower demand-moderate inflation
Concerns about the economy of early 1990s: Inflation>20% and GNP growth > 12% is unsustainable-needs to find the new way to