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Sinopec to sell $4.2b bonds to fund expansion

(Agencies)
Updated: 2008-02-18 11:52

China Petroleum & Chemical Corp (Sinopec), supplier of two-thirds of the nation's auto fuels, will sell 30 billion yuan ($4.2 billion) of bonds to help build a cross-country pipeline and ethylene plants.

Sinopec will start selling the bonds with warrants on February 20, the company said in a statement to the Hong Kong stock exchange. The bonds have a six-year term, the company said.

China is encouraging companies to issue bonds to reduce reliance on bank loans and provide investors with an alternative to the nation's stock market. Sinopec needs to fund a capital spending bill that was forecast to jump 38 percent last year as energy demand surges in the world's fastest-growing major economy.

Sinopec will use the bond sale's funds for the building of a pipeline to transport natural gas from the southwestern province of Sichuan to Shanghai, the company said. Sinopec said it is also building two ethylene plants, each with a capacity of 1 million metric tons a year, in the cities of Tianjin and Zhenhai as well as another ethylene plant in Wuhan.

The company will issue 300 million bonds incorporating warrants that can be converted into Shanghai-traded stock at a ratio of one share for every two warrants.

Sinopec started building the pipeline from the Puguang field in September to meet rising demand for cleaner-burning fuels. The 1,700-kilometer link will cost 62.7 billion yuan. Sinopec projects 2007 capital spending at 110 billion yuan.

Puguang held 356 billion cubic meters of gas reserves by the end of 2006, Sinopec President Wang Tianpu said last August.

China International Capital Corp, Goldman Sachs Gao Hua Securities Co and CITIC Securities Co are arranging the sale.


(For more biz stories, please visit Industry Updates)



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