Guangxi Guiguan Electric Power Co, a subsidiary of China's second biggest power producer, China Datang Corp, said on Thursday that it received 30 million-yuan ($4.38 million) from the government to cover its losses in the Sichuan earthquake in May.
Two of the Guiguan's power generators located in Sichuan province were damaged by the earthquake. "The compensation is just enough to cover that loss," said a Guangxi Guiguan spokesman.
The compensation can set a precedent for further capital injection from the government to boost the financial structures of the other major power companies that have taken a beating from the sharp fall in demand in the economic slowdown.
China's five biggest power groups posted a combined loss of 26.8 billion yuan in the first ten months of 2008 in contrast to an aggregate profit of 28.3 billion in the same period a year earlier.
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. In addition, China Datang Corp's losses were about 6 billion yuan. China Huadian Corp posted a loss of 6.07 billion yuan. China Power Investment Corp's losses amounted to about 4.85 billion yuan.
"They will be facing difficulties securing additional bank loans or raising funds in the lackluster stock market," said Zhang Guobao, head of the National Energy Administration.
The Chinese government said earlier it will study measures to help power companies because their losses stemmed mainly from the State-controlled pricing system.
The Chinese government has approved 54.78 billion yuan in aid to State-owned firms, including the power companies, to help them ride out the global financial crisis.
The State-owned Assets Supervision and Administration Commission (SASAC), which oversees some 140 major State-owned enterprises, said earlier that about 49 percent of the money would be used to increase its shareholdings in those firms.
The rest of the funds would be spent on helping the companies to restructure or to recover from natural disasters in 2008, including the Sichuan earthquake.