PetroChina launches its IPO

PetroChina, the country's largest energy company, has launched its long-awaited local initial public offering, which could raise more than $9bn in what would be the largest domestic listing.

The IPO would also be well timed to take advantage of a soaring local share market. Shanghai's benchmark index has increased sixfold in just over two years.

PetroChina, a unit of China National Petroleum Corp, said in a statement to the Shanghai and Hong Kong stock exchanges on Sunday night that it planned to offer 4bn local A-shares for sale to investors.

The state-controlled oil and gas group had said in its prospectus on September 20 that it expected to raise Rmb37.8bn ($5bn), a figure that now could be exceeded.

If the 4bn A-shares were priced at a level comparable with PetroChina's shares traded in Hong Kong, the listing could raise about $9.8bn.

PetroChina's market capitalisation, using one measure based on its closing price in Hong Kong last week, was $437bn - ranking the company as the world's second-biggest - ahead of General Electric but behind ExxonMobil.

After it lists on the Shanghai stock exchange, it could even surpass Exxon to become the world's most valuable quoted company, although the thin float arguably makes the market value a poor guide to PetroChina's true value.

Such valuations are based on the improbable projections that all of the company's non-tradable shares still held by the state parent are equal in value to the traded shares.

A-shares have traditionally been priced at a discount to Hong Kong's H-shares and often well below the price local investors are willing to pay. As a result, locally listed shares traditionally jump sharply on their debut.

The largest previous local listing was Shenhua Energy, a unit of China's largest coal company, which raised $8.9bn in Shanghai last month. Shenhua Energy was about 30 times oversubscribed and soared by about 87 per cent on its opening trading day.

Large state-owned companies like PetroChina, which once only ventured abroad to sell shares, have been coming home to list in increasing numbers.

Their listings have been encouraged by Chinese regulators which want to boost the local stock market, which endured a four-year slump before it began to pick up in mid-2005.

The pricing for the IPO is expected to be announced on October 30, with trading starting about a week later.

The company has said that it will use the money raised by the IPO to fund five projects, including the construction of oilfields and the expansion of ethylene capacity. ( FT )

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