1st LD Writethru-China Focus: China's stock market goes nuclear

China National Nuclear Power Co., Ltd (CNNP) started taking subscriptions from investors on Tuesday, aiming to raise 13.2 bln yuan (2.15 bln U.S. dollars).

It is believed to be the largest initial public offering (IPO) in four years in China's A share market.

Intending to issue 3.9 billion shares at 3.39 yuan a piece, the CNNP IPO could be the biggest since Power Construction Corp. in September 2011.

CNNP's IPO price was 22.29 times the company's 2014 earnings, lower than an average earnings ratio of 22.32 for the industry, according to CNNP statements posted on the Shanghai Stock Exchange website on Tuesday.

Altogether, 1.17 billion CNNP shares, 30 percent of the total, will be transacted online, while the rest will be traded offline, said the statements.

In the first three months this year, the company's operating revenue reached 6.36 billion yuan, up 45.1 percent compared with the same period last year.

CNNP warned investors of the risk of policy changes concerning nuclear power and preferential tax.

China will increase its nuclear power capacity to 58 million kilowatts by 2020, a rise of 170 percent over the current level, said Xu Yuming, deputy director of the China Nuclear Energy Association last month.

Xu estimates that this will require 100 billion yuan of investment every year given that there are only 23 nuclear power units operating in China, with a combined capacity of only 21.4 million kilowatts.

The State Council, China's Cabinet, issued a guideline in November, saying that they will make it easier for private investors to get involved in sectors like clean energy, solar and nuclear power.

CNNP is a subsidiary of China National Nuclear Corporation (CNNC), which invests, builds and operates nuclear power plants. Historically, CNNC successfully developed an atomic bomb, hydrogen bomb and nuclear submarines and built the first nuclear plant on the Chinese mainland.

Chinese Premier Li Keqiang promised earlier this year to promote clean energy, including nuclear power. Low efficiency of energy use has close links with the smog that troubles China's megacities.

Pilot nuclear power units using Hualong One technology, a domestic third generation reactor design were approved in April. The homegrown technology will help contribute to industrial upgrades and steady economic growth.

CNNP is the largest of 23 companies with IPOs this week, expected to lock up nearly 5 trillion yuan of liquidity. Under market rules, major shareholders of new stocks are subject to one or two years lock-up before they are permitted to trade.

The IPOs come during bull market in China's stocks. The Shanghai Composite Index has climbed 52 percent this year, the most among all global benchmark indexes.

Two batches of IPO applications instead of one each month mean the China Securities Regulatory Commission has approved 123 IPOs this year.

Chinese shares closed higher today, with the benchmark Shanghai Composite Index up 1.7 percent to finish at 4,910.53 points. The benchmark Shanghai Composite Index soared 4.71 percent on Monday after sharp rises and falls last week. On May 28, the index dived 6.5 percent to finish at 4,620.27 points, after closing at a fresh seven-year high the previous day.

The IPOs may be partly to blame for the drastic fall on May 28 as investors tried to get capital together. Subscribers to the new IPOs see them as a sure way of making money. Endi