Why is China Power buying up big in Guangzhou?

China Power International Development agreed to buy 25 percent of Guangzhou Power Enterprise for 749.5 million yuan ($103 million) to gain from growth in industrial production in southern China. The fifth-largest Hong Kong-listed mainland electricity producer will use the acquisition to expand in Guangzhou, a city where power demand increased 12 percent annually between 2001 and 2005.

Power producers in China, the biggest energy consumer after the U.S., are increasing capacity to supply the world's fastest- growing major economy. China Power has set a goal of almost tripling capacity to 15,000 megawatts by 2010. Guangzhou Power, wholly owned by Guangzhou Development Group, accounts for 40 percent of co-generation plants in the city.

Co-generation plants produce two or more forms of energy from a single primary energy source. The purchase agreement is subject to approval from the State-owned Assets Supervision and Administration Commission. Guangzhou is the largest city in Guangdong province, where economic output will reach $390 billion this year, exceeding Taiwan.

Guangdong has already surpassed Singapore and Hong Kong and the province's economic growth has accelerated faster and lasted longer. The province's total production in the first 10 months of 2007 increased 14.7 percent from a year earlier.

How will China Power reach its goal of 15,000 megawatts by 2010?