Reuters . Shanghai

The Chinese government has taken back control of Luneng Group, a large domestic power firm, from two privately-owned companies by paying about 8.3 billion yuan ($1.16b), Luneng's listed units said on Saturday.

State-owned Shandong Electric Power Corp and two other state entities have reached an agreement to buy a combined 95.47 per cent stake in Luneng Group from the Beijing-based private firms, including Beijing Guoyuan United Co Ltd, they said.

The deal was announced by Guangdong Golden Horse Tourism Group Stock Co 000602.SZ, Tianjin Guangyu Development Co 000537.SZ and Shandong Luneng Taishan Cable Co 000720.SZ, all units of the Luneng Group, in separate filings with south China's Shenzhen bourse.

The private investors in 2006 bought the stakes from dozens of shareholders, mainly power sector employees who received shares ahead of a nationwide industry reform in 2002 that broke up China's former power monopoly, according to Caijing, an influential Chinese financial magazine.

Caijing said last year the deal had attracted the attention of the central government, which suspected that Luneng Group's assets were purchased for too low a price. China's power sector, the world's second largest, has been a focus of keen political interest in recent years, given its critical role in the country's booming economy.

The three firms said in April that China's top securities regulator had notified Beijing Guoyuan that the company's indirect acquisitions of three listed firms violated the securities law and must be rectified.

The three Shenzhen-listed firms said on Saturday that Shandong Electric would hold 77.14 per cent stake in Shandong Luneng Group Co Ltd, based in the eastern province of Shandong, after the deal, while the remaining 18.33 per cent stake would be owned by another Shandong firm and a local trade union.

The stakes would be sold at Luneng Group's book value at the end of 2007, the statements said. Luneng Group said on its Web site, www.lunenggroup.com, that it is a diversified, large-scale resources enterprise with power, mining, property and logistics operations across China as well as in Russia and Malaysia.

It had total revenue of 26 billion yuan at the end of 2006. Shandong Electric, under the direct control of China's massive power transmission company State Grid Corp, generated a net profit of 1.75 billion yuan in 2007 on sales of 86.4 billion yuan, according to the three Shenzhen-listed firms' statements.

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