Datang International Power Generation Co (Datang Power), one of China's leading power producers, yesterday said its net profit for 2008 fell 79 percent from a year before due to high coal prices in the first three quarters and sharp decline in power demand in the fourth quarter.
In a statement to the Hong Kong bourse, the company said its net profit for 2008 amounted to 761 million yuan on sales of 36.8 billion yuan, up 12.4 percent from a year before.
"During 2008, the imbalance between the demand and supply of thermal coal was further aggravated and thermal coal prices continued to rise at high levels with a marked deterioration in quality, thereby severely undermining the profitability of power generation companies," said the company statement.
"As a result of the global financial crisis, the growth of demand for power consumption slowed, thereby leading to significant decreases in the growth of power generation and power consumption," it said.
Datang Power, which is the listed arm of China Datang Corp, is primarily engaged in power generation businesses with its main focus on coal-fired power generation.
Xue Jing, director of the department of statistics and information under China Electricity Council (CEC), earlier said that China's power companies were expected to post a combined loss of 70 billion yuan in 2008.
However, this year will be better for China's power companies, as coal prices have plunged since late last year, she said.
Spot coal prices reached a record 1,080 yuan per ton at the Qinhuangdao port, China's largest coal port in Hebei province and a domestic benchmark, last July and have since declined 48 percent to an average of 557.5 yuan per ton now.
Datang Power has not signed any major contracts with China's coal miners for this year, its Chairman Zhai Ruoyu said yesterday.
Chinese coal miners aimed to charge power producers 10 percent more for the fuel under the 2009 annual contracts, while power producers wanted a price cut of as much as 10 percent as electricity demand has fallen, Xie Juchen, a fuel purchasing director at CEC had told China Daily earlier.
Analysts said that if China's utility companies could supply 30 percent of their own coal demand, they would be less vulnerable to coal price fluctuations.
Datang Corp was earlier given approval to expand into the coal-mining business, according to the State-owned Assets Supervision and Administration Commission.