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Finance, Accounting and Control Case Study

Case Title:

China State Grid's IPO: Will It Aggrandize or Attenuate The Power Sector Reforms?

Publication Year : 2010

Authors: S Chaudhuri and A Ghosh

Industry: Utilities


Case Code: FAC0053IRC

Teaching Note: Not Available

Structured Assignment: Not Available

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The Chinese power sector has seen a series of reforms since the 1980s. These reforms provided continued momentum for the development of the power industry, by combining economic returns with social welfare. But even after all these reforms, the Chinese power sector suffered from power shortages, inadequate grid network, scarce capital, lack of transparency, lack of professionalism and competition. The very urge to overcome these challenges, led the Chinese government to decide the listing of its largest state power transmitter, State Grid Corporation. The IPO (initial public offering) was expected to raise $35 billion. However, impediments in terms of cost of fuel and restrictive regulations might still pose a threat to the proper utilisation of the fund for strengthening the reforms. The very possibility of this public listing creating pressure of increasing the return on invested capital, which might force the state grid to increase its tariffs, can't be undermined. Thus, the success of further reform in the Chinese power sector depended on whether the same is fortified or sapped by the State Grid's IPO.

Pedagogical Objectives:

  • To discuss the dynamics and the growth of the power sector.
  • To analyse the position of SGCC (State Grid Corporation of China) in the Chinese power sector.
  • To analyse the role of SGCC in funding the Chinese power sector reform.

Keywords :  Chinese power sector, Electric power law, Ministry of Electric Power Industry, Generation, Transmission, State Power Corporation, Power grids, State Grid Corporation, State Electricity Regulatory Commission, Tibet Electric Power Company, IPO (initial public offering), Coal generation, China Southern Grid Corporation

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