Govt offers 10b yuan in subsidies for power sector

By Xiao Wan (China Daily)
Updated: 2009-01-20 07:58

China is to provide as much as 10 billion yuan in subsidies to big power companies, the latest effort on the part of the government to help the country's struggling industries.

The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) will give the subsidies to the five leading power generating companies and the two grid companies to cover their losses caused by last year's snowstorms, the Sichuan earthquake, soaring coal costs and capped power tariffs, reported China Business Journal, citing an unnamed source with State Grid Corp of China.

The five power producers are China Huaneng Group, China Datang Corp, China Guodian Corp, China Huadian Corp and China Power Investment Corp, and the two grid companies are State Grid and China Southern Power Grid Co.

The subsidies will come from dividends of the State-owned enterprises (SOE) paid to the central government in 2008, a source with State Grid told China Daily yesterday.

Since 2008, SOEs in oil, power, telecommunications, coal and tobacco have had to pay a dividend of 10 percent of their profits to the government.

"The government has planned for over 50 billion yuan subsidies to SOEs to cover their losses during last year's snowstorms and the earthquake," said the source, who declined to be named.

The power companies may incur 70 billion yuan losses in 2008, said Xue Jing, director of the department of statistics and information under the China Electricity Council (CEC).

Huadian's listed arm Huadian Power International Corp Ltd earlier said in an earnings alert to shareholders that it expects a loss for 2008. "Although the government raised the electricity price twice in the year, it still cannot cover our increase in production cost," it said.