Zhangzhou Houshi Power Plant

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In 1996, the Fujian provincial government agreed to purchase electricity from the Formosa Plastics Group's (FPG) proposed 3,600 MW thermal power plant for 10 years in order to supply state-owned enterprises in the region. FPG was Taiwan's largest plastics manufacturer and was headed by tycoon Y.C. Wang. The plant was to be operated on a 23-year BOT basis and was to be built in several phases. According to the original plan, the conglomerate's three flagship companies -- Formosa Plastics, Nan Ya Plastics and Formosa Chemicals and Fibre -- would put up a total of US$420 million for a 60% stake in the venture, with the remaining 40% taken by unnamed US partners. However, in 1999, due to Taiwanese government restrictions on local enterprise investments in mainland China, Y.C. Wang decided to become the sole Taiwanese investor in the project. The Formosa chairman raised 10 billion Taiwan dollars (US$302 million) from his own pocket and financial institutions in the United States to the make the investment and acquire the 60% stake. FPG's subsidiaries in the U.S. fronted the rest of the equity. The total investment amounted to US$3.2 billion for the six 600-MW generators, of which 90% came from loans. The first two units entered operations in 1999 and by mid-2004, all six units were up and running. The project suffered losses early on and Y.C. Wang had publicly considered scrapping the project altogether. However, by 2003 the power plant was making significant profits due to widespread power shortages in China. By mid-2004, FPG was awaiting final approval from the Fujian provincial government to set up four more 600 MW coal-fired units with an estimated price tag of US$2.38 billion. None None