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Mar. 23 (NBD) - CGN New Energy Holdings Co., Ltd. (CGN New Energy) announced Wednesday night that it has signed a memorandum of understanding (MoU) with its controlling stakeholder China General Nuclear Power Group (CGN Group).

According to the MoU, CGN New Energy is considering to sell all issued shares of its South Korean unit CGN Korea Holdings Co., Ltd. to CGN Group or other third parties. The company also intends to acquire a 51 percent stake in CGN Wind Energy Limited through its subsidiary.

CGN New Energy plans to shift its business focus to non-nuclear clean energy. Li Yilun, Chairman of CGN New Energy, said after the incorporation of wind power assets and spin-off of its assets in South Korea, its attributable installed wind power capacity would increase to 78.6 percent of its total.

South Korean unit suffers profitability squeeze  

According to the company filing, its South Korean unit has a 2,046 Megawatt (MW) power generation program, which includes a 1,524 MW gas-to-power program, 15 MW fuel cell power program, and 507 MW fuel power program. CGN New Energy said if its South Korean asset was sold, the company would free up more capital to develop non-nuclear clean energy and renewable energy projects, so as to expand installed capacity and business scale.

NBD noticed that its South Korea-based gas-to-power program has been a major revenue contributor since 2014 when CGN New Energy got listed. As of December 31 of 2017, its China and South Korean units generated 58.8 percent and 41.2 percent of its attributable installed capacity (4962.4 MW), respectively.

However, with the launch of new electric power projects, the competition in South Korea's electricity market gets intensified, causing a drop in both average utilization hours and generated capacity of gas-to-power program owners in the country. The rising natural gas prices also added to the woe of those companies, squeezing their profitability further.

According to the financial report for 2017 released by CGN New Energy, the average utilization hour of gas energy produced by its South Korean unit was 4,124 hours in 2017, down 14.7 percent year on year.  

CGN New Energy to incorporate more wind, solar assets 

According to the company filing of CGN New Energy, CGN Group directly owns 51 percent of CGN Wind Energy, with the remaining 49 percent in the hand of a Shenzhen-based company. CGN New Energy plans to acquire a 51 percent stake in CGN Wind Energy Limited, which has wind energy programs in 27 Chinese provinces so far. As of December 31 of 2017, CGN Wind Energy's installed capacity has totaled 10 GW.

When it came to the acquisition price, CGN New Energy is said to take as reference the valuation given by a third-party valuer and make the payment in cash installments. The fund may come from its internal financial resources, loans from banks, or other financing measures.

According to the financial reports of CGN New Energy, its after-tax profits coming from wind and polar power increased by 146.5 percent and 51.8 percent respectively.

As a listed arm of CGN Group, CGN New Energy is expected to incorporate more renewable energy assets. The company said it will speed up efforts to incorporate the wind and solar assets given by its parent company.

Email: tanyuhan@nbd.com.cn