(Bloomberg) -- China Everbright International Ltd. plans to raise about HK$9.96 billion ($1.27 billion) from a rights issue for its waste-to-energy projects, business expansion and the repayment of bank loans. The shares plunged as much as 26 percent.

The company plans to issue 1.66 billion rights shares on the basis of 10 shares for every 27 existing shares, it said in a statement to the Hong Kong stock exchange. The subscription price is HK$6 per rights share, a discount of about 31 percent to its last closing price of HK$8.75 on Monday, according to the statement.

As one of China’s leading waste managers, the company has invested extensively in building and operating waste-to-energy projects including trash burning across the country. Everbright’s profit climbed 23 percent in the first half to HK$2.2 billion in the first half of the year, according to a separate statement to the Hong Kong stock exchange on Tuesday.

The rights issue is “a surprise, given they should have sufficient cash and bank facility,” said Dennis Ip, an analyst at Daiwa Capital Markets Hong Kong Ltd. The company seems to have already readied enough cash for its HK$10 billion to HK$13 billion capital spending this year, Ip said.

The stock slumped as much as 26 percent to HK$6.51 after the announcement, the most since October 2008, and traded at HK$6.71 at 1:29 p.m. local time. The shares have lost about 40 percent this year.

Everbright said it plans to use the proceeds for its existing and future waste-to-energy projects, pursue other environmental protection businesses including waste sorting and atmospheric monitoring, as well as general working capital and loan repayments.

The rights issue will “strengthen the group’s capital base and enhance its financial position without increasing finance costs,” Everbright said in the statement. It also gives “shareholders the opportunity to participate in the growth of the group through the rights issue at a price lower than the current market price.”

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng, Abhay Singh

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