Construction Bank, China's top property lender, has won nearly $1 billion in investment from three domestic industry leaders ahead of an IPO that could be worth up to $10 billion, an investor said on Wednesday.
Baosteel Corp, Yangtze Power and State Grid Corp will together spend 8 billion yuan ($967 million) buying 4.11 percent of the bank's listing vehicle, which hopes to push through the largest ever IPO by a mainland firm by 2005.
It picked five founding shareholders, including the three corporate investors, for listing unit China Construction Bank Corp, to be set up officially next week.
"We have abundant and stable cash reserves and can buy the stake with our own cash," Yangtze Electric Power Co Ltd said in a statement in the Shanghai Securities News.
Beijing is racing to clean up a banking sector laden with more than $200 billion in sour debt and often cited as an Achilles Heel of the world's seventh-largest economy.
Construction Bank and rival Bank of China, the nation's premier foreign exchange lender, are spearheading the reform effort ahead of near-full foreign competition by 2007.
Yangtze Power, which operates the Three Gorges Dam project - the world's largest hydropower project - will take a 1.03 percent stake in Construction Bank's listing vehicle with 2 billion yuan in cash, it said.
Baosteel, the parent of Baosteel Iron and Steel Co Ltd - China's top steel maker - and power giant State Grid Corp will invest 3 billion yuan to buy 1.54 percent each, Yangtze added.
Analysts say their investment will provide access to bank loans in future to fund the expansion of the three firms, and a potential windfall when the lender goes public.
Construction Bank's new firm would have a paid-up capital of 194.23 billion yuan ($23.47 billion).
The biggest shareholder in the vehicle would be Central Huijin Investment Co - set up at the end of 2003 to oversee a $45 billion capital injection split by Construction Bank and Bank of China - with an 85.23 percent stake.
It won approval to split into China Construction Bank Corp, which in essence would remain the primary operating arm, and holding company China Construction Bank Investment Co Ltd.
"With the investment, we hope to get better investment return to maintain strong profitability and establish stable relationships with financial institutions to get more financial support in our future expansion," Yangtze Power said.
Yangtze Power needs money to increase capacity and meet ballooning demand for power.
China, the world's top electricity market after the United States, is in the grip of its worst power crunch in decades, sparking plant shutdowns and emergency measures nation-wide.
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