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Yangtze Power Achieves Record Profits on Strength of Three Gorges Project; Ford Increases Indian Investment; China Eastern Shareholders Defy Government Approval of Asset Share; Hochschild’s 2008 Outlook and Mining Operations Devalued
- China Yangtze Power Co. Ltd. reported yesterday (Tuesday) that third quarter profits rose 7% in 2007. The company, which operates the world’s largest hydroelectric project, reported a net profit of $732 million on total sales of $1.2 billion. The firm attributed increased profits to a combination of heavy demand in the rapidly growing Chinese economy and improved water flows from the Yangtze River. Investment gains also played a large part in the record profits, as the company received cash dividends from its 0.53% stake in China Construction Bank (PINK: CICHF), totaling $50.41 million in 2007. Yangtze Power also announced construction on the remaining five turbines on the right bank of the Three Gorges Project will be completed in 2008, allowing the hydroelectric plant to operate at full capacity for the first time since it came online in 2003. The Three Gorges Dam-based plant generated 61.7 million kilowatt-hours of electricity in 2007, a 25% increase over 2006. By 2009, company officials estimate the plant will be producing 84.7 million kilowatt hours of power for the region.
- Ford Motor Company (F) announced yesterday (Tuesday) that it plans to invest more than $500 million in India over the next two years. Ford intends to double capacity at its pants in Tamil Nadu from the current levels of 250,000 engines and 200,000 cars. Ford also wants to produce a small inexpensive car to take advantage of the fast growing middle class in India. The executive vice president for Ford’s Asia Pacific and African operations stated that this move highlighted India’s role in Fords expansion and growth plans and brings Ford’s total investment in India to $875 million. Currently the company sells its existing Ikon, Fusion, Endeavor and Fiesta models in the country. The new investment is the first step in its plan to make India a regional manufacturing and distribution center for smaller cars that are expected to be in demand throughout Asia. This follows announcements last year that Ford was expanding into Thailand and China. The company is investing an additional $500 million to build a plant in Thailand and has begun production of a small car in China.
- Shareholders in China Eastern Airlines Corp. Ltd. (CEA) overwhelmingly voted down a proposal to sell a 24% stake of the airline to Shanghai Airlines Co. Ltd. and Temasek Holdings Pte. for $920 million, . What makes this vote unique is that the State Council, China’s top administrative body, had already approved the deal. It is unusual for a company to break from state decisions in takeovers in China, and this will be the largest deal so far where shareholders have ignored the state’s approval. Air China Ltd. (PINK: AICAF) is expected to make a hostile offer for a stake in China Eastern. Air China already owns 3.9% of China Eastern and has been lobbying large shareholders to resist the offer as it felt it was too low. China Eastern will now be pressured to find a buyer because it is losing money and needs the cash infusion to run and expand operations in the future. Li Feghau, chairman of China Eastern expressed regret that the deal had been rejected, but said that will not take a partnership with Air China as he feels it will hurt the aviation industry in China.
- Growth in gold and silver production for Hochschild Mining Plc weren’t enough for the Peruvian miner not to post a bleak 2008 forecast, ShareCast reported. The company expects higher depreciation expenses, namely the quality of silver ore. Hochschild is also shifting production from its older mines, which are wholly owned, to newer facilities where profits will be shared by partners, further impacting overall profits in 2008. Hochschild shares dropped 23.5% in London trading after the statement was released.