In this case HNP's chairman is Li Xiaopeng, son of Li Peng, as in the Li Peng former premier of China and Party chairman. Now that's being well positioned!

But Huaneng Power also happens to be the country's most efficient utility, very profitable, very strong financially, and a near miss to the Cara list of the Global 100 Best Companies. HNP is that good!

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Sector 55: Utilities
HNP Huaneng Power: Major thermal power utility for China that is very profitable

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Huaneng Power is a huge electric power utility in China, one of the country's largest independent ones, capable of generating almost 20,000 megawatts of electricity a year, almost all coal-powered.

Of course, as to China power utilities, the State(-owned) Power Corp is really, really huge with a rated capacity of 147,000 MW " and that's without including the Three Gorges Dam.

HNP market cap is $9.3 billion, and 17,900 employees work there. The current price is $31.13 and is fairly valued. The company is financially strong.

On January 31, Smith Barney initiated coverage with a Buy Rating (at $29.50).

Presently two Wall Street analysts have a combined 2.0 rating on a scale of 1.0 (best) to 5.0 (worst). Their price objective for 2005 seems to be $34-$36.

The dividend yield of 3.9 percent is equal to the U.S. electric power industry average. But that's where the comparisons stop. The PE for HNP is a very low 10.8 versus the U.S. industry average of 17.0. Return on Equity for HNP is an impressive 16.8 versus 11.0 in the U.S. Finally, gross (EBITDA) margin is an impressive 44.8 percent.

Is there a catch?

Well a couple years ago, HNP reported three sets of numbers, depending on China GAAP, U.S. GAAP or International Accounting Standards (IAS), as applied in Hong Kong. It's the age-old question of which abacus are they using today.

Net earnings that year (2001) were $439.1 million under Chinese GAAP, $416.6 mil under IAS, and $403.4 mil under U.S. GAAP. The most important fact is that regardless of which abacus is used, the earnings continue to grow.

Funny, but this doesn't bother me near as much as listening to TH's on CNBC try to spin an audience.

You see, I have as much faith in the independent auditors in China as I do elsewhere, where it goes without saying I do. Being a former CA, CMA, I have a great respect for the auditing profession.

BCara@BillCara.com