Sembcorp Industries has won government approval to co-invest with state-owned Chongqing Energy Investment Group in a coal-fired power project in the southern Chinese city.
With the go-ahead, Sembcorp had made an equity injection of about 925 million yuan ($202 million) for a 49 per cent stake in the Chongqing SongZao Sembcorp Electric Power joint venture. The Chongqing Energy unit Chongqing Songzao Coal and Power holds the remaining stake.
The joint venture operates a 300-megawatt coal-fired power plant and is building another 1,320-megawatt coal-fired power plant in the Qijiang district of Anwen Town.
Sembcorp had signed a conditional joint venture agreement with Chongqing Energy last year, pending government approval as the group is owned by the Chongqing municipal government.
The new plant, which is more than 50 per cent completed, is expected to commence commercial operations by the first quarter of 2017.
The total investment value of the two plants will be about 6 billion yuan, financed by a combination of equity and on-shore long-term financing, Sembcorp said yesterday.
The plants are the only power facilities in Chongqing where coal is dug out of the ground and run directly into the plants. They will be among Chongqing's most efficient plants, said Sembcorp.
The impending reform of Chongqing's power market, which allows power generation suppliers to retail electricity directly to qualified power consumers, will also work to the plants' advantage, Sembcorp added.
Sembcorp's energy portfolio in China also includes a gas-fired power plant in Shanghai, and wind power plants in Inner Mongolia and Hebei.
The firm now has 2,757 megawatts of thermal and renewable power capacity in operation and under development.
Earlier this month, Sembcorp signed a memorandum of agreement with Myanmar's Department of Electric Power Planning to develop a 225-megawatt gas-fired power plant in central Myanmar.
The Chongqing investment is not expected to have a material impact on the earnings per share and net asset value per share of Sembcorp for the current financial year, the firm said.
The announcement was made before markets opened. Shares closed up a cent at $3.06.