NewQuest agrees $190m China Hydroelectric take-private

According to a regulatory filing, affiliates of NewQuest will pay $3.51 per American Depository Share, representing a 57.4% premium to the September 3 closing price, the last trading day before the offer was submitted. The PE firm originally offered $2.97 per share.

The transaction will be financed through a combination of fresh equity provided by NewQuest and rollover equity from existing shareholders. The private equity firm's contribution will be split between its first and second funds. The latter reached a first close of $215 million in December and has a final target of $300 million, with a hard cap of $330 million.

NewQuest, which was created in 2011 through the spin out of Bank of America Merrill Lynch's Asia private equity team, specializes in direct secondary transactions. It currently holds approximately 54% of China Hydroelectric, having picked up stakes from other investors. Including a portion of shares held by Tsing Capital over which NewQuest has beneficial ownership rights, this holding rises to 59%.

NewQuest's interest in acquiring China Hydroelectric can be traced back to September 2012 when it led an investor group that successfully replaced five of the company's seven directors, citing strategic and operational issues at the company and the apparent lack of credibility and accountability on the board.

Other members of the group included Swiss Re, Tsing Capital and Aqua Resources, as well as two family offices, Abrax and IWU International. They collectively owned 40% of China Hydroelectric and claimed to have invested approximately $170 million in the company since 2008.

NewQuest controlled 30.2% of China Hydroelectric at the end of 2012 and by the time it launched the take-private bid this share had grown to 49.83%, with sufficient options and warrants to cross the 50% threshold.

China Hydroelectric was set up in 2006 to acquire and operates small hydroelectric power projects of less than 50 megawatts in capacity. Over the next three years it raised approximately $350 million through four rounds of private financing and then $100 million when it went public in January 2010.

As of June 2013, it had a total installed capacity of 517.8 MW through 25 hydropower stations - of which 21 were acquired and four were green field. The company sells its electricity to local power grids, which are mandated by the government to buy from small hydro plants for fixed tariffs.

China Hydroelectric posted revenues of $85.4 million in 2012, up 56% year-on-year, which saw its net loss narrow to $1.1 million from $55.3 million. However, it was still struggling with a debt burden of $270.2 million, with 44% of the principal due within three years.

In the past year China Hydroelectric has sought to cut costs and restructure debts. Net income for the first half of 2013 rose 23% year-on-year to $6.8 million while revenues dropped slightly to $48.1 million, although the EBITDA margin increased.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Buyouts
• Secondaries
• Greater China
• Cleantech
• NewQuest Capital Partners
• China
• buyout
• Cleantech
• Secondaries