HEI buys 60%
take in China plant
It will help build and operate
By Russ Lynch
a coal-fired facility
for a steel firm
Star-BulletinA subsidiary of Hawaiian Electric Industries Inc. is building and will operate a 206-megawatt power plant for a steel company in Inner Mongolia, China, the company said today.
HEI Power Corp., which does HEI's energy development work in foreign countries, is investing about $100 million to get a 60 percent interest in the joint venture developing the coal-fired electric plant for Baotou Iron & Steel (Group) Co.
Baotou, also known as BaoGroup, has a 25 percent interest and the other 15 percent is held by a private company in Hong Kong, United Power Pacific Co., which has been involved in processing crude oil in China since 1991. HEI said that UPP developed the Inner Mongolia project and was instrumental in getting Chinese government approval.
The conclusion of the deal with the Chinese is the culmination of a long effort, Robert F. Clarke, HEI president and chief executive officer, said today. "We've been at this a little over three years."
Clarke said the deal is a good example of HEI Power's strategy of helping other countries develop power sources for industrial users. In this case, the new plant will power the steel factory. HEI has an edge over mainland electric companies in getting into Asia, Clarke said.
"We're the only U.S. utility that operates stand-alone systems," he said, unlike the mainland where power plants in various areas are linked together. In developing countries, stand-alone plants are called for and that's where HEI has the expertise, he said.
The China project is the biggest so far for HEI Power, which has had its ups and downs since it was formed in 1995 to seek foreign jobs. The company has an investment of about $15 million in a power plant in Guam. Earlier efforts to get into Cambodia and the Philippines were dropped.
HEI will soon set up an office in Beijing and staff it from Hawaii, Clarke said. The plan calls for ownership of the electricity plant to be transferred to BaoGroup at no cost in 20 years. BaoGroup, owned by the Chinese government, is the fifth-largest steel company in China, HEI said.
"This investment firmly establishes HEI Power Corp.'s presence as an independent power producer in China," Clarke said.
He said many independent power producers have tried to get established in China but the results have been mixed. HEI is concentrating on niche markets connected to China's industrial development and believes it will get significant earnings from China in a few years, Clarke added.
BaoGroup uses 400 megawatts of power now but will need 700 megawatts in 2000 to run a plant expansion, HEI said. The first of two generating units to be built by HEI Power will be operating by mid-2000 and the second by the end of that year, the company said. HEI said construction has already begun.
