BEIJING (Reuters) - China Hongqiao Group, the world’s top aluminum producer, is to sell off coal-fired power generation assets for 3 billion yuan ($422 million) as it prepares to move almost one-third of its capacity to hydropower-rich Yunnan province.
The company has “conditionally” agreed to sell power units with installed capacity of 1.32 gigawatts (GW) to Shandong Guoxu New Energy Co, according to a filing to the Hong Kong stock exchange late on Wednesday.
Hongqiao, whose current annual aluminum capacity of around 6.5 million tonnes is all in industrial heartland Shandong, has traditionally relied on captured, or on-site coal-fired power plants for the energy-intensive aluminum smelting process.
But with China’s sprawling aluminum industry under environmental pressure, Hongqiao has joined other smelters in choosing to set up a production base in Yunnan, Southwest China, to take advantage of cleaner hydropower.
The first phase of its 2 million tonnes per year project in Yunnan is due to start up by the end of this year.
“The group believes that the demand for thermal power generation will further decrease following the development of the group’s aluminum production base in Yunnan,” Hongqiao said in the statement, adding that the “disposal of relatively outdated” units would further improve its efficiency.
Hongqiao is also pursuing a solar power project in Shandong.
The 3 billion yuan payment is to be made in three installments by Feb. 28, 2021, Hongqiao said, adding that it expected to record a loss of around 242 million yuan from the disposal, since the book value of the assets was 3.242 billion yuan at the end of last year.
Hongqiao is due to report is 2019 financial results on Friday.
Reporting by Tom Daly; editing by David Evans