China Huaneng Group, one of the nation's five largest electricity generating firms, yesterday agreed to pay US$227 million for a 50 per cent share of OzGen, an Australian subsidiary of Boston-based InterGen.

The deal is the first among Chinese companies seeking to acquire major overseas assets in the power-generating sector.

Huaneng beat out Sime Darby of Hong Kong, Australia's Origin Energy and Stanwell Corp, a state-owned plant in Queensland, to win the bidding.

OzGen holds a 53.7 per cent stake in the 880-megawatt Millmerran power plant and 50 per cent stake in the 920-megawatt Callide C power plant. Bothplants are located in Queensland, Australia.

"The plants have some of the lowest production costs in the Australian power market,'' Huanengsaid in a statement yesterday.

An analyst with a leading investment bank in Australia said it is difficult to evaluate the deal as little information has been released.

"Basically, Huaneng can get stable cash flows from the acquisition as the power market in Australia is mature and the generators are new and of lower costs,'' the analyst, who requested anonymity, told China Daily.

Huaneng could also have a good chance to win a bargain price because the electricity tariff in Queensland is subsiding due to market oversupply, the analyst added.

The time is also good for Chinese firms seeking to buy generating assets in Australia, as US companies are withdrawing their investments from the region primarily due to their own financial problems, he said.

Li Xiaopeng, Huaneng Group's chairman and president, told China Daily the deal is an important step for Huaneng to expand its foreign presence and become a Global 500 firm by 2010.

Li said the acquisition will realize a good profit return. The company has invited a dozen investment banks to help evaluate the assets, and they believe the cost of the acquisition is consistent with international standards, Li said.

He said Huaneng will send selected personnel to join the two firms' management teams after completing the acquisition.

Huaneng's acquisition is the latest important energy deal between China and Australia this year.

During Chinese President Hu Jintao's visit to Australia in October, China National Offshore Oil Corp, the nation's third-largest oil firm, signed a preliminary agreement to buy U$21 billion worth of liquefied natural gas from Australia's Gorgon gas field.

Huaneng a few weeks ago established a strategic alliance with Australia's coal conglomerate BHP Billiton. The companies are negotiating the possibility of supplying Australian coal to Huaneng's power plants in China, building generators and exploring for coal deposits in both China and Australia.

Huaneng has said it plans to double generating capacity by 2010 to 60,000 megawatts, from the current 30,700 megawatts.

The company is expected to generate 162.9 billion kilowatt-hours of electricity this year, up 7 per cent from last year.

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