On Wednesday, Reuters reported that Morgan Stanley Infrastructure Partners – the global infrastructure fund of Morgan Stanley (MS) – along with other investors has invested $150 million in Zhaoheng Hydropower Holdings Ltd. – a Chinese hydropower firm. The global infrastructure fund specializes in making diverse investments for infrastructural developments on behalf of Morgan Stanley.
Other investors in the group led by Morgan Stanley included FountainVest Partners Co. and Olympus Capital Holdings Asia. Also in December 2010, this group had invested $150 million in the same firm. The current investment brings the total invested amount to $300 million, symbolizing the biggest private investment made in the renewable energy and hydroelectric sector of China.
Zhaoheng plans to buy hydropower plants with the proceeds of the investment. Moreover, it aims to improve the operating capacity of the firm with the funds over the span of two years. Currently, the Chinese firm, with the total installed capacity of about 650 megawatts (MW), operates through 30 hydroelectric plants in seven districts of China.
China, the largest producer of hydroelectric power in the world, has the capacity to generate more than 200 gigawatts (GW) of hydroelectric power. Further, the country’s renewable energy law encourages the development of the hydropower segment. Also, the country's 12th five-year plan necessitates it to raise electricity-generation from the hydro power sector to over 450 GW by 2030.
The Chinese government has prioritized the hydropower development in the country and intends to hike the utilization level to 55% by 2020. Further, the different strategies issued by the Chinese government in the past years bear evidence to the government’s intention to promote small and medium hydropower stations in the country.
Last month, in another major investment made in the energy sector, Citigroup, Inc. (C) along with Credit Suisse Group (CS) offered to fund roughly $325 million of SunPower Corporation’s (SPWR) residential solar lease projects. In addition to complementing the SunPower Lease program, these funds are expected to broaden the funding alternatives available to the customers interested in harnessing the greatly efficient SunPower solar power systems.
We expect the investment in Zhaoheng Hydropower Holdings Ltd to help Morgan Stanley augment its revenue to some extent.
Morgan Stanley currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain our long-term ‘Neutral’ recommendation on the stock.
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