Chinalco unit delays Hong Kong IPO to June on Iran tensions-sources

A unit of China's state-owned aluminum producer Chinalco has delayed a $500 million Hong Kong initial public offering planned for this month till at least June due to the impact of western sanctions on Iran, two sources said on Wednesday.

By then, China Aluminum International Engineering's (Chalieco) business contracts with Iran would have expired, smoothing the way for the flotation, the sources, who had direct knowledge of the plans, said.

Chalieco is an infrastructure engineering and technology company with operations in over 10 countries, including Iran. The company had hired Morgan Stanley and UBS along with China International Capital Corp to handle the listing.

The sequence of events is not entirely clear. IFR, a Thomson Reuters publication, reported over the weekend that mounting political tensions between the United States and Iran had left the IPO in limbo.

U.S. government sanctions on Iran prohibit American companies from engaging in any transactions, including financing or brokering, related to goods or services of Iranian origin or goods or services owned or controlled by the Iranian government.

U.S. investors are also barred from making any new investments in Iran or in property owned or controlled by the Iranian government.

"The Iran issue is a real issue. Not just for the banks, but for the investors also," one of the sources said. "And it's becoming a bigger issue lately." The sources could not be named due to the sensitive nature of the matter.

Other Chinese has also been caught up in the sanctions push.

ZTE Corp, China's second-largest telecommunications equipment maker, last week said it will "curtail" its business in Iran following a report that it had sold Iran's largest telecom firm a powerful surveillance system capable of monitoring telephone and Internet communications.

Shenzhen-based ZTE had signed a 98.6 million euro ($130.6 million) contract with the Telecommunication Co of Iran in December 2010 that included the surveillance system.

Tensions between the West and Tehran have grown in recent months as sanctions aimed at slowing Iran's nuclear programme have curbed its oil sales and increased scrutiny over banking transactions with the country.

A spokesman for Chinalco, Chalieco's parent company, confirmed the company has plans for an IPO, but gave no further information on the timing, or whether it had been delayed because of its business in Iran.

UBS declined to comment, while Morgan Stanley could not offer an immediate comment.