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Last Updated: Tuesday, 18 November, 2003, 07:35 GMT
China dam shares' sparkling debut
New reservoir
The new reservoir has flooded many towns
Shares in the company behind China's huge Three Gorges Dam project have risen 45% on the first day of trading.

China's largest IPO has raised $1.2bn for Yangtze Electric Power after the offer was 70 times oversubscribed.

The $25bn dam project will eventually generate 10% of China's electricity.

The controversial project will also displace one million people and flood millions of acres of farmland.

Huge project

Despite overseas concern about the giant dam's environmental impact, Chinese investors have rushed to buy shares in the company funding the massive hydroelectric project.

The enthusiasm shown towards China's largest float of 2003, has been fuelled by the fact the country's electricity consumption is rising 16% annually, and current supply is failing to keep up with the demand.

"The power industry has become a bottleneck for China's economic development in recent years," said Yang Zhishan of China Southern Securities.

When fully completed by 2009, the dam will generate more than 80 billion kWh of electricity a year.

The first of its 26 generators went online back in July.

Hot shares

Many expect the shares to continue to rise despite a depressed Chinese stock market.

"The company is better than other existing power stocks because it has lower production costs and is a market leader," said Sun Chao, an analyst with CITIC Securities.

Profits at the company are expected to surge next year when four more generators come into service.

Natural power
The dam will provide 10% of China's electricity needs
David Yip, analyst at Merrill Lynch, said: "China energy stocks are a hot topic, not only domestically but internationally as well. Power shortages are the best thing for power producers."

While retail investors tried to buy nearly 70 times the number of shares on sale, subscription levels from institutional investors, who are being offered 45% of the float, were not published.

The Yangtze Electric Power IPO is the fourth-largest ever in China, following after oil giant Sinopec, mobile carrier China Unicom, and China Merchants Bank.

One investor, 34-year-old Jian from Shanghai, said, "I'm investing because I've lost hope in most stocks at the moment. This is a new opportunity and I want to take advantage of it."

Shares in Yangtze Power ended Tuesday's trading session at 6.26 yuan, versus an IPO price of 4.30 yuan.

Resettlement

After 10 years of construction the 300m high dam has meant one million people having to be resettled due to whole areas beside the Yangtze river in central China being flooded as the reservoir started to fill up.

Whole towns disappeared under the water.

Despite this human impact, the Chinese authorities say the dam will stop the devastating - and all too frequent - Yangtze river floods.

It is the largest hydroelectric project the world has ever seen, with the resulting 365 mile-long reservoir visible from space.


WATCH AND LISTEN
BBC World Service business reporter Theo Leggett
"Electricity consumption is growing by more than 15% every year."



SEE ALSO:
Three Gorges shares go on sale
03 Nov 03  |  Asia-Pacific
China dam sets date to float
28 Oct 03  |  Business
China's ghost town vanishes
05 Sep 03  |  Asia-Pacific
China dam switches on power
10 Jul 03  |  Asia-Pacific
Waters rise behind massive dam
01 Jun 03  |  Asia-Pacific


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