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Power firms bleed from high costs
By Si Tingting and Wan Zhihong (China Daily)
Updated: 2008-12-09 08:11

Power firms bleed from high costs
Technicians at a power firm in Anhui province upgrade transmission systems.[Asianewsphoto]

China's power companies may incur 70 billion yuan losses this year due to rising fuel costs and lackluster electricity demand, said an official with an industry association.

"By now the power companies have posted losses of over 20 billion yuan, and I think their full-year losses will exceed 70 billion yuan," said Xue Jing, director of the department of statistics and information under China Electricity Council (CEC).

According to a source with one of China's five leading power companies, the country's five biggest power generators posted losses of 26.8 billion yuan from January to October.

China Huaneng Group, the nation's largest power company, lost 3.4 billion yuan, while China Guodian Corp had a deficit of 6.55 billion yuan, according to the source. In addition, China Datang Corp's losses were about 6 billion yuan, China Huadian Corp recorded a loss of 6.07 billion yuan, and China Power Investment Corp's losses were about 4.85 billion yuan.

"Among the five companies' coal-fired power plants, 90 percent are loosing money right now and 70 percent of them have a deficit of more than 100 million yuan," said the source, who asked not to be named. "And I expect the percentage to grow later this year."

In the first half of this year coal prices have seen sharp increases, which have sent many domestic power companies into the red, said Xue.

Many sectors of the economy have seen a slowdown since September because of the global financial crisis, causing a decline in power generation, she said.

"Because of the slowdown in many high energy-consuming industries such as the steel and the nonferrous industry, lots of power plants now cannot operate in full capacity," she said.

China's power generation may tumble 7 percent in November from a year ago, following the 4 percent decline in October, said an official with CEC.

It would be the first time that power output has declined for two months in a row. Analysts said the drop in consumption and supply signaled a slowdown in the country's economy that went "beyond expectations".

"The sudden slowdown in power demand shows many companies in the manufacturing sector have cut production due to a continuous price slump of industrial commodities both at home and abroad," said a Guotai Jun'an analysis issued last month.

Analysts further warned the decrease in power supply may sound an alarm for a future economic slowdown, as successive falls in power generation often precede a similar downward trend in economic growth.

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