Asia Private Equity Review - Greation China Edition

This online issue of the Asia Private Equity Review - Greater China Edition is made available with abbreviated content. To read the full content together with more in-depth news, perspectives, and analysis, please subscribe or contact us to purchase back issues.

July 2010 Issue
 二零一零年七月號

Content 內容提要


Feature
 封面文章

Analysis
本期關注

Case Study
案例研究

News
動態透視

Institutional Investors
機構投資者

Funds
基金動向

Investments
投資聚焦

Divestments
資金套現

The Lens
圈內透視

People on the Move
人物花絮

Window of the world
世界之窗

Summary : Subscribers’ weekly
每週摘要

Summary : Deal
交易摘要

Stock Watch
股價表現

Index & Exchange Rates
索引及匯率

 

Curbed Energy

They were supposed to be among the largest initial public offerings from China’s clean tech industry. They were both due to be listed in June, one in Hong Kong and one in the USA, but their much expected public offerings were postponed. Xinjiang Goldwind Science & Technology Co., Ltd. (新疆金風科技股份有限公司)(‘Xinjiang Goldwind’) announced it would delay its listing on the Stock Exchange of Hong Kong (‘SEHK’) despite having raised HK$9.09 billion (US$1.17 billion). Just weeks before, Nobao Renewable Energy Holdings Ltd. (挪寶新能源集團)(‘Nobao’) shelved its plans to become the largest IPO for a Chinese company on the US bourse this year.

Both Xinjiang Goldwind and Nobao are among the growing list of clean tech companies, backed by private equity capital, that are deferring their public debuts. Earlier in the year, JinkoSolar Holdings Co., Ltd. (晶科能源有限公司) pushed back its listing schedule by weeks, while Daqo New Energy Corp. has made no mention of its listing plan since filing for an issue of American Depositary Receipts in late January. The increasingly uncertain debut schedule of clean tech companies appears to signal investors’ waning interest in deploying capital to this group of companies.

Surging Fund Pool
Ironically, there has been no abatement of investors’ commitments to funds that focus on the clean tech space, especially from domestic institutions. The first half of the year saw seven funds being launched that were seeking to raise more than Rmb14.5 billion in aggregate. As an illustration of foreign investors’ relatively subdued interest, among these funds launched, the UK-based Origo Partners plc was the sole nonresident fund management firm that launched a clean tech fund, with modest target size of US$75 million.

China’s own institutions are keen to subscribe to clean tech funds. The US$1 billion of fresh capital that came into this sector during the first half of the year was raised entirely by domestic managers. As an illustration of their overwhelming interest to invest in clean tech companies, this US$1 billion of fresh capital far surpassed that raised in the preceding two years, US$415 million in 2008 and US$124.5 million in 2009 (fig. 1).

The Clean Tech Fad
Long before the current clean tech fund craze that has entranced domestic investors, foreign private equity investors had already set their sights on the emerging pool of opportunities in the green tech space. Since 2008, transactions consummated by foreign investors accounted for substantial amounts in transaction aggregates, contributing 39% and 64% of the 2008 and 2009 totals respectively. The first half of the year, however, saw an increased collaboration between foreign and domestic investors, resulting in syndicated transactions taking the lion’s share of the amount deployed in the past six months (fig. 2). ......

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Divestments 資金套現
Credentials Established
Shenzhen has cast its identity in the China private equity market

In the early years when the Shenzhen Stock Exchange (‘SZSE’) was established, it was regarded as a bourse of lesser financial prowess. This changed when Beijing decided that the southern stock exchange would be the fund raising platform for the country’s small and medium enterprises. The SZSE’s credentials were further boosted when ChiNext became one of the two major boards of the exchange. The SZSE has now firmly established itself as a prime avenue of liquidity, not only for local private equity and venture capital investors in China’s A-share market, but also for foreign long-term equity investors.

The SZSE is home to two trading boards, the Small and Medium Enterprises Board (‘SME Board’) and ChiNext, China’s own version of NASDAQ. When the SME board hosted the first venture capital-backed company’s initial public offering (‘IPO’), Shenzhen Coship Electronics Co., Ltd., back in December 2000, its investors were Shenzhen Capital Group Co, Ltd. and Shenzhen Fortune Venture Capital Co., Ltd. The SME Board was largely seen as a listing platform for companies backed by domestic venture capital firms. Until the launch of ChiNext, only Eternal Asia Supply Chain Management Ltd. (‘Eternal Asia’) listed on the SME Board were known to have raised foreign private equity capital; the financial backers of all other companies were domestic firms. SAIF Partners invested in Eternal Asia (fig. 24).

When ChiNext commenced its trading activities, it also marked a change in the investors’ profile of those companies backed by venture investors. Among the first twenty-eight companies showcased in the first batch of ChiNext’s IPOs, Warburg Pincus was the investor of Lepu Medical Technology (Beijing) Co., Ltd. (樂普(北京)醫療器械股份有限公司). The latter was the largest company by market value among this first group of companies quoted on ChiNext. It was a powerful affirmation that global firms have come to recognise SZSE’s ability to be a principal exit avenue for assets in China. Since then, the listing of Shenzhen Hepalink Pharmaceutical Co., Ltd. (深圳市海普瑞藥業股份有限公司)(‘Hepalink’) on ChiNext, which was backed by Goldman Sachs Group Inc. (‘Goldman Sachs’), further bolstered the SZSE’s credentials. Hepalink attained two milestones: it had not only successfully raised capital from Goldman Sachs, an esteemed institution in the global financial industry; it also set a record for offering the most expensive shares at its IPO for the global pharmaceutical industry.

In June, the SZSE added another feather to its cap when Beijing Venustech Inc. (北京啟明星辰信息技術股份有限公司)(‘Venustech’) chose the SME Board as its listed address. Venustech is a provider of network security products, trusted security management platform and specialized security services and solutions. One of Venustech’s venture investors is Kleiner Perkins Caufield & Byers (‘KPCB’), a name that is synonymous with the success of the US venture capital industry. KPCB invested in Venustech in 2005 and it holds a 14.29% stake in Venustech. It is worth noting that despite having such a distinguished foreign investor as its shareholder, Venustech did not follow the usual route adopted by most of China’s technology companies in choosing NASDAQ as its listing platform, instead preferring to be quoted on its home market. On the other hand, even though KPCB has been a partner with Venustech for more than six years, the venture capital firm has chosen to continue to hold its shares without disposing any of them at Venustech’s IPO.

In the same month, venture capital powerhouse IDG Capital Partners (IDG資本)(‘IDG’) also joined other foreign firms and showcased its portfolio company, Andon Health Co., Ltd. (天津九安醫療電子股份有限公司)(‘Andon’) on the SME Board. A developer of household medical health electronics, Andon is IDG Capital’s second portfolio company that was listed in the A-share market. Its first was Sunsea Telecommunications Co., Ltd. (深圳日海通訊技術股份有限公司) made its public debut in December 2009.

Perhaps investors reckon the future performance of the SZSE warrants further patience. While the southern bourse has been busy recording unabated listings of private equity and venture capital-backed companies, their investors appeared to be in a rush to dispose of their holdings as records of return of cash are conspicuously absent.

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