Sinopec eyes $1.2B in record share sale

By Staff and wire reports

HONG KONG, China -- China's number-two oil company plans to raise more than $1.2 billion through what will be the nation's biggest domestic share offer.

China Petroleum and Chemical Corp, or Sinopec, said on Thursday it had received approval to issue 2.8 billion A shares to Chinese investors.

With the stock sale, the integrated Chinese oil company will be able to tap into a large pool of cheap funding from the Mainland for acquisitions and new development projects.

"The issue of A shares will further strengthen our capital base and open a new financing channel for Sinopec," said Sinopec's chairman Li Yizhong in the statement.

Class A shares are yuan-denominated stocks available only to investors on the Mainland.

"With the proceeds from the A share issue, we will be able to fine-tune the integration of the company's upstream and downstream operations," Li added.

Gideon Lo, an analyst at Hong Kong's Kim Eng Securities, told reporters that Sinopec chose to sell shares in the domestic market since it's the lowest-cost option.

"Besides," Lo added, "The A-share market is more liquid and the brand is well known, so it doesn't have to worry there won't be demand for its issue.''

China's bull run

China's domestic markets are becoming increasingly popular targets for fundraising after a two-year bull run.

Shanghai's A share market was the world's sixth-best performer in the past 12 months, rising 12 percent.

Sinopec plans to use about $780 million (6.45 billion yuan) of the proceeds from the offering to finance its acquisition of a 100 percent stake in Sinopec National Star Petroleum from its parent.

Another $178 million (1.47 billion yuan) of the proceeds would be used towards developing the Ningbo-Shanghai-Nanjin crude oil import pipeline project and $295 million (2.44 billion yuan) for the Maoming-Guizhou-Kunming refined oil pipeline in eastern and southwestern China.

Sinopec said the issue price of the A shares would be within a fixed range, and determined by the book-building process. No indicative price range was given.

Sinopec also said it forecasts its net profit for the year ending December 31, 2001 to be $2.2 billion (18.02 billion yuan), up from $1.95 billion (16.15 billion yuan) in 2000.

The oil company jumped 2.68 percent to HK$1.53 in Friday afternoon trading.

Reuters contributed to this report.