Shares of Gepic Energy Development rose after the Chinese renewables company got the green light to buy a controlling CNY7.6 billion (USD1 billion) stake in a highly profitable thermal power firm held by its parent.

Gepic [SHE: 000791] closed 4.6 percent higher at CNY6.84 (USD1) in Shenzhen today, resulting in a nearly 23 percent surge since the beginning of this year.

The listed unit of Gansu Province Electric Power Investment Group got the go-ahead from the provincial manager of state-owned assets to purchase 66 percent of a thermal power company known as Changle and issue CNY1.9 billion of shares via private placement, the Lanzhou-based firm announced yesterday.

The provider of hydroelectric, wind, and solar power said earlier that it would pay partly in cash and partly by issuing new shares.

The new asset should improve the buyer's profitability. Last year, the operator of thermal power plants boosted its net profit by almost 51 percent to CNY1 billion from 2022, equaling nearly two times that of Gepic, while hiking its operating income by nearly 20 percent to CNY4.3 billion.

The related-party transaction and the resulting expansion of Gepic's business scope are aimed at removing horizontal competition within the group. Gansu Province Electric said earlier that after transferring its renewable energy assets under its listed unit, it would do the same to its thermal power and other electricity generation assets by Dec. 27, next year.

Industry insiders predict that the addition of Changle should improve Gepic's output to some extent. Last year, Gepic generated 8.6 billion kilowatt hours of power, or around 92 percent of its target, indicating the third straight year of failing to reach its goal, according to data revealed in March.

（Picture: Veer）