Dam Good Business

Dams are major construction projects that create jobs, but may lead to major disruption to the lives of the people living in the new catchment area of the dam. Dams serve three major purposes; flood control, provision of drinking water (reservoirs) and power generation. The last of these purposes is achieved by allowing water out of the dam through a series of turbines. The water pressure turns the turbines causing a coil to rotate within a magnetic field and so producing electricity.


This week has seen the launch of shares in Sinohydro Corporation on the Shanghai stock exchange. Sinohydro Corporation is a Chinese concern which builds dams both within the People’s Republic of China, but also abroad. The shares went like proverbial hot cakes, seeing a 38% hike over their initial offer price of 4.5 Yuan to 6.22 Yuan – such was the demand for the shares that they triggered a temporary suspension of their trading on the exchange.

The Sinohydro listing represents the larges initial public offering (IPO) of the year and has raised 13.5 billion Yuan ($2.1 billion). The anticipated valuation range for the launch was between 4.5 to 4.8 Yuan and the IPO had been expected to realise only 17.3 billion Yuan. Analysts consider that the successful launch of Sinohydro bodes well for other IPOs planned for the coming months. With the cooling of the global recovery (such as it was) this was far from certain.

Given current market sentiment, Sinohydro had scaled back the IPO by about 20% in anticipation of weak investor response. The IPO had also been geared towards the bottom end of the share price band and this may have helped to boost demand for the shares. “The stock should have room to rise further, due to its modest valuations as well as previous concessions to downsize its fundraising,” according to Pan Hongjun of Central China Securities.

China’s emergence as a leading industrial power has led to an enormous demand for energy; much has been met through the construction of coal-fired power stations. This has led to criticism from the ecology lobby because the coal used is low quality and produces considerable atmospheric pollution.