Huadian earmarks 33.5b yuan for 84pc increase in capacity
Huadian Power International, the largest power producer in Shandong province, plans to raise its total generation capacity 83.9 per cent in the next three years, according to director Zhong Tonglin.
The company aims to have a 40 gigawatt capacity by the end of 2010, up from 21.74 GW at the end of last year.
Huadian is aiming for an 18.37 per cent rise in power output this year and wants to keep fuel cost rises per unit of output under 10 per cent.
Analysts were cautious about its prospects this year, expecting even higher increases in coal prices and interest costs.
The goal will primarily be achieved by building more plants and acquiring units from its parent, China Huadian Group.
To realise the target, it has set aside 33.5 billion yuan (HK$37.1 billion) of capital expenditure for the next three years. Part of this will be funded by a planned 5.3 billion yuan bond issue and another 5.3 billion yuan raised through a warrant issue.
The plan was unveiled after it posted on Tuesday a 0.43 per cent fall in net profit to 1.19 billion yuan as higher coal prices and a threefold jump in interest costs more than wiped out the benefit of a 40.46 per cent generation growth.
Huadian Power has 7.7 GW of proposed coal-fired projects in Shandong, Henan, Anhui province, as well as the city of Chongqing and Ningxia autonomous region, waiting for central government approval.
It also has a 1.52 GW Luding hydro project in Sichuan province and 0.6 GW of wind power projects in Inner Mongolia and Ningxia autonomous regions and Hebei province, pending Beijing's blessing.
It is also eyeing 15 GW of its parent's generating capacity in Fujian, Hunan, Hubei and Jiangsu provinces, Tianjin city and Inner Mongolia autonomous region.
Mr Zhong said Huadian Power's coal cost per unit of output was expected to equal or exceed 16.4 per cent this year, after rising 5.85 per cent last year.
While that will squeeze its profit margin, given the nation's freeze on power tariffs, the impact will be partly offset by higher output.
Mr Zhong would not give an output target for this year, but expected the plant utilisation rate to rise to between 5,000 and 5,100 hours from 4,674 hours last year while generation capacity will be raised by 1.6 GW, or 7.35 per cent.
'With the thin margin, Huadian has the highest net profit sensitivity to coal cost among its peers,' wrote Citigroup head of regional utilities research Pierre Lau.