Power Assets Holdings Ltd. (6), controlled by Asia’s richest man Li Ka-shing, reduced the size of an initial public offering of HK Electric Investments and will sell almost a fifth of the electricity supplier to State Grid Corp. of China.
Power Assets will raise as much as HK$27.9 billion ($3.6 billion) selling HK Electric units at HK$5.45 to HK$6.30 apiece, it said in a statement yesterday. The company is offering a 50.1 percent stake in HK Electric, after previously saying it planned to sell as much as 70 percent of Hong Kong second-largest power supplier.
Power Assets is set to complete the world’s biggest trust IPO in almost three years as growth slows in Hong Kong, where Li has been selling assets. The price range implies an estimated 2014 dividend yield of 6.26 percent to 7.24 percent for HK Electric, Power Assets said.
“You can make the argument that there’s very little growth opportunity in Hong Kong,” said Michael Parker, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “The relationship between the regulators and utilities has not been positive for the last few years.”
State Grid, China’s biggest power distributor, agreed to invest as much as HK$10 billion for an 18 percent stake in the unit, according to the statement. Oman Investment Fund also agreed to buy a stake for HK$387.5 million. Power Assets will hold 49.9 percent of the unit after the offering, it said yesterday.
HKT Trust, the owner of Hong Kong’s biggest telecommunications carrier, trades at an estimated 2014 yield of 6 percent, according to data compiled by Bloomberg. Champion REIT, which owns commercial property in the city, trades at a 5.4 percent estimated 2014 yield, the data show.
HK Electric will have a market value of HK$48.2 million to HK$55.7 billion, Power Assets said.
Hutchison Port Holdings Trust, also controlled by Li, raised $5.5 billion through a Singapore IPO in March 2011, according to data compiled by Bloomberg. The trust has fallen 33 percent from its offer price. Hui Xian Real Estate Investment Trust, which was spun off from Li’s Cheung Kong Holdings Ltd., has slumped 27 percent since a March 2011 IPO that raised $1.8 billion.
Power Assets shares have fallen 9.3 percent in the past year, in line with the 7.2 percent decline for CLP Holdings Ltd., Hong Kong’s biggest electricity provider. The benchmark Hang Seng Index has slid 2 percent over the period.
Li, 85, has a net worth of $29.6 billion, according to the Bloomberg Billionaires Index. Goldman Sachs Group Inc. and HSBC Holdings Plc are joint sponsors for the HK Electric listing, Power Assets said Dec. 15.