China's sovereign wealth fund, China Investment Corp., has agreed to buy US$400 million worth of shares in China Longyuan Power Group Corp.'s (0916.HK) initial public offering, making it the biggest strategic investor, two people familiar with the situation told Dow Jones Newswires on Tuesday.

China's largest producer of electricity generated by wind power plans to raise up to US$2.5 billion in the IPO, and has secured around 30% of the funds.

Apart from CIC, four cornerstone investors have agreed to buy US$330 million worth of Longyuan shares, according to a preliminary prospectus seen by Dow Jones Newswires on Tuesday. U.S. billionaire investor Wilbur Ross agreed to buy US$100 million worth of shares, China Life Insurance (Group) Co. agreed to buy US$180 million, and Value Partners Group Ltd. (0806.HK) and Bank of East Asia Ltd. Chairman David Li agreed to buy US$50 million worth of shares in total.

Separately, Henderson Land Development Co. Chairman Lee Shau Kee plans to subscribe to US$100 million worth of Longyuan shares, a Henderson Land official said Tuesday.

Longyuan's IPO has attracted influential investors, large funds and companies, as many are eager to tap China's surging demand for renewable energy. China plans to meet 15% of its energy requirements with renewable sources by 2020, double its share in 2005.

Longyuan, which aims to list on the Hong Kong stock exchange on Dec. 10, started marketing the offer on Monday and is scheduled to price its offer on Dec. 3, the preliminary prospectus said.

In the base deal, Longyuan is selling 2.1 billion shares in a HK$6.26-HK$8.16 indicative price range to raise US$2.2 billion, a person familiar with the situation said Monday. Longyuan also has an option to raise the deal size by 15% to raise a total of US$2.5 billion.

Proceeds will be used to invest in existing wind power projects, repay bank loans and replenish its working capital, the preliminary prospectus said.

Longyuan is the renewable-energy arm of China Guodian Corp., one of China's five biggest state-owned power generators by capacity.

The wind-power electricity generator earmarked CNY33.1 billion for capital expenditure to boost its consolidated installed capacity to 6,500 megawatts by 2010.

As of Sept. 30, the company had 3,032 MW of installed capacity.

Morgan Stanley (MS) and UBS AG (UBS) are handling the IPO.

-By Yvonne Lee, Dow Jones Newswires; 852-2802-7002; yvonne.lee@dowjones.com
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