Bonds help firm's capital needs

GD Power Development Co said yesterday that it plans to issue up to 4 billion yuan (US$572 million) in six-year bonds with detachable warrants to raise capital to repay debt and fund project construction.

The bonds, with a face value of 100 yuan each, will carry an annual yield of between 1 percent and 2 percent, the Shanghai-listed power generator said. The final coupon rate will be decided after an auction, it said.

Holders of each piece of bond will be given warrants to buy 10.7 shares of the utility at 7.50 yuan each after two years, the statement said. Shares of GD Power closed 2.92 percent higher at 7.40 yuan yesterday.

The company said it will use the proceeds of the debt sale to repay loans and finance power projects in the provinces of Shanxi, Liaoning and Jilin as well as the Inner Mongolia Autonomous Region.

"The bond sale will improve the firm's debt structure and cut its interest costs," said Zhang Zhonghua, an Orient Securities Co analyst. "It can help secure capital for developing future projects."

GD Power also disclosed that it will use the proceeds from the conversion of warrants into shares to fund three hydropower projects in Sichuan Province.

"We are upbeat about the hydropower projects," said Zhang. "The company's diversified power-generation sources will enhance its abilities to counter risks better than traditional coal-powered electricity generators."

GD Power's first-quarter earnings fell to 233 million yuan from 443 million yuan a year ago on higher costs. Sales rose to 4.38 billion yuan from 3.55 billion yuan in the first quarter of 2007.