Huaneng Power to cut generation capacity amid flood of new supply

PUBLISHED : Thursday, 05 April, 2007, 12:00am
UPDATED : Thursday, 05 April, 2007, 12:00am

Huaneng Power International, the mainland's largest listed power producer, plans to cut generation capacity growth this year by as much as half, as a flood of new supply is expected to lead to a decline in plant utilisation.

Huaneng Power, a unit of state-owned China Huaneng Group, would add 2,800 to 3,800 megawatts of new plants this year, chairman Li Xiaopeng said yesterday.

That represents a 10.4 to 14.1 per cent increase from its gross installed capacity of 26,912MW at the end of last year, compared with 20.9 per cent growth last year.

Huaneng Power and other mainland electricity suppliers are adding fewer plants after years of rapid capacity growth to meet the country's soaring energy demand.

The mainland's total generation capacity is forecast to slow to 95,000MW, or 15.2 per cent this year, from 105,000MW, or 20.3 per cent last year, according to the China Electricity Council.

'The addition of 7,000MW of capacity last year, mostly in the second half, will drive [Huaneng Power's] output growth this year,' Mr Li said.

Output growth is unlikely to come from the purchase of its parent firm's 6,000MW of coal-fired plants, as Huaneng Power's vice-chairman Huang Long said operating performance of those plants did not meet its acquisition standards.

Mr Li also said Huaneng Power would not be involved in its parent firm's bid for the auction of 9,200MW of power assets offered by State Grid Corp of China.

Huaneng Power's usage rate might fall 7.3 per cent to 5,600 hours this year from 6,045 hours last year because of new supply, Mr Li said, steeper than government forecast of a 6.8 per cent decline for the industry.

New supply will be partly offset by the closure of small and inefficient plants, as Beijing pushes policies to cut pollution from coal combustion.

Mr Li said China Huaneng had set a target to shut 3,600MW by the end of 2010, of which 560MW belonged to Huaneng Power.

In its latest policy to phase out small plants, industry regulator National Development and Reform Commission yesterday said it would cut power tariffs within four years at all plants of 50MW or less, 100MW plants that are 20 years old or more, and 200MW plants reaching their designed lifespan.

In earlier circulars, the government said it would give approval priority to construction of large plants if they promised to close small plants.

Huaneng Power plans capital expenditure of 17.5 billion yuan this year, mostly to fund plant construction, up from 16.28 billion yuan last year.

Following the central government's policies to encourage development of renewable energy, the Huaneng Group plans to build 10,000MW of hydro-power projects and commission more than 2,400MW of other renewable energy projects by 2010.