| Huaneng dips close to daily limit |
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| Thursday,October 23,2008 Posted: 16:10 BJT(0810 GMT) |
| From:China Daily Article type:Reproduced |
The share price of Huaneng Power International came within a hair's breath of its daily limit on the Shanghai Stock Exchange, after announcing a third-quarter loss of 2.16 billion yuan ($31.59 million).
The company, one of the country's largest listed power producers, suffered the huge loss due to rising coal prices and the government's electricity price caps.
The company said in its third-quarter report that it may post a full-year loss due to higher coal costs, which offset gains from rising electricity prices. The Beijing-based utility made a profit of 1.56 billion yuan a year ago.
"Although power tariffs have been adjusted upwards on two occasions this year, the increment still cannot offset the rise in fuel costs," Huaneng said.
"If thermal coal prices remain at high levels in the fourth quarter and no new tariff adjustment is adopted, the company will continue to lose money."
Shi Yan, a Shanghai-based utilities analyst at UOB-Kay Hian Ltd, told China Daily that the cost of fuel coal accounts for 75 to 80 percent of the firm's total costs and Huaneng's performance would gradually improve in the coming months only if coal prices were lowered. She said that dwindling coal demand resulting from the global economic crisis was likely to drive prices down.
"As all power companies had a lackluster third quarter, I believe the government should think about raising electricity prices," she added.
According to a report from Donghai Securities Co Ltd, coal prices will remain relatively high, though market prices may drop from time to time.
It added that a lower CPI would make it possible for the country to raise electricity prices for the third time this year. Although government tariff caps prevent power companies from passing on record coal costs to customers, the authorities have already raised electricity prices twice this year in July and August to ease the burden on power companies.
By balancing these two factors, Donghai Securities said it believes Huaneng will enjoy a better performance in the fourth quarter.
Most listed power companies had a gloomy third quarter. According to Wind Info, the leading integrated service provider of financial data and software in China, among the 26 listed power companies that released third-quarter reports, 18 announced a loss and 70 percent expressed concern over future performance.
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