Huaneng powers to 87pc profit rise

PUBLISHED : Wednesday, 01 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:47pm


Huaneng Power International, the listed unit of the nation's biggest power producer, China Huaneng Group, forecast higher power demand and lower coal prices in the year's second half, after posting an 87.7 per cent year-on-year jump in net profit in the first six months.

First-half net profit amounted to 2.12 billion yuan (HK$2.6 billion), up from 1.13 billion yuan a year earlier, on the back of higher power prices.

Revenue rose 4.9 per cent to 67.18 billion yuan, as a 1.46 per cent year-on-year fall in power output due to the economic slowdown was more than offset by a 6.5 per cent rise in the average power selling price that took effect on December 1.

'In the second half, as Beijing's policies to support economic growth take effect ... power consumption is expected to pick up,' Huaneng said. 'With coal inventories staying high in many places, there is still room for prices to come down further in the second half.'

As a result, some analysts expect Huaneng's profit growth momentum to continue in the third quarter.

'We are positive on Huaneng and expect its net profit to surge over 30 per cent in the third quarter [from the second quarter], driven by lower fuel costs and higher output volume,' Citi's head of Asia utilities research, Pierre Lau, wrote in a research report. Huaneng is projected to post a net profit of 5.58 billion yuan this year and 6.64 billion yuan next year, up from 1.18 billion yuan last year, according to the average estimate of 28 analysts polled by Thomson Reuters.

But, Lau noted that the earnings volatility of mainland power producers would likely grow next year amid hints from regulators that they might scrap the heavily regulated annual coal procurement contract system so that all coal consumed by power plants was subject to market forces.

The gap between spot market coal prices and the government-manipulated annual contract prices has narrowed to 5.6 per cent, from as much as 40 per cent last year.