Power unit faces ceiling on capacity
Beijing Datang Power Generation will be hit by the planned reform of the power industry, according to a brokerage.
Under a deregulation plan, each mainland independent power producer (IPP) can have installed capacity of no more than 30 per cent of its provincial power grid. The ceiling is designed to prevent IPPs from dominating grids.
Beijing Datang's installed capacity would reach 37 per cent of the North China power grid in 2003, Warburg Dillon Read said.
Its present 28 per cent of installed capacity would rise to 29 per cent next year and in 2001, and 35 per cent by 2002.
Its future expansion under the 30 per cent ceiling would probably be restricted, although divestment might not be required, the brokerage said.
A 'sizeable portion' of the company's capacity was expected to be uncompetitive under a new tariff system.
'In this industry, there are high barriers to entry, given the very large capital expenditure involved. Therefore it is relatively easy for dominant players to collude to create obstacles to the implementation of a competitive on-grid tariff system,' Warburg said.
The proposed restriction would have no impact on Shandong International Power Development, which has market share of 21 per cent rising to 25 per cent by 2003, or Shandong Huaneng Power Development, which has 10 per cent market share, projected to expand to 15 per cent in five years.