Huaneng capacity-raising plan to cost 100b yuan
Huaneng Power International, the nation's largest listed power producer, has unveiled a 100 billion yuan (HK$110.5 billion) plan to expand generation capacity 61.6 per cent over the next three years and establish a key presence in coal production and logistics.
The diversification strategy will help the firm boost profit margins that have been squeezed by government controls on electricity tariffs and surging coal costs.
Huaneng aimed to have 60 gigawatts of installed generation capacity, 50 million tonnes of annual self-produced coal supply capacity, 40 million tonnes of coal storage and transshipment capacity at ports and 30 million tonnes of coal shipping capacity by the end of 2010, said chairman Li Xiaopeng.
Installed generation capacity controlled and minority-invested by Huaneng amounts to 37.11GW.
'We are confident that we can achieve our target as our existing approved and early-stage projects in the pipeline already amount to about 16 GW, and we are already planning other new projects,' Mr Li said.
Company secretary Gu Biquan said the generation capacity expansion would require 65 billion yuan of investment while the entire expansion plan would involve 100 billion yuan.
The strategy includes building a coal logistics base in Yingkou, Liaoning province, a second one in Taicang in Jiangsu and a third in Haimen, Guangdong. They will serve plants in northern, eastern and southern China.
Huaneng may also acquire its parent firm's stake in a 50-50 joint venture, Shanghai Times Shipping, with China Shipping Development. The venture is rapidly expanding its fleet of vessels carrying dry-bulk goods including coal.
To hedge exposure to surging coal prices, Huaneng last year took a 10 per cent stake in a Shanxi province coal-mining project that was expected to have annual output capacity of 30 million tonnes when on stream in 2011, of which 10 million tonnes would be earmarked for Huaneng's power plants, said chief accountant Zhou Hui.
Mr Li said yesterday the company hoped to contain the increase of its coal cost per unit of output to within 18 per cent this year, up from 10 per cent it indicated earlier this year.
The company on Tuesday posted a 1.46 per cent rise in net profit to 6.16 billion yuan despite a 12.33 per cent growth in turnover, after a freeze on tariff increases from July 2006 and higher interest costs crimped profits.
Meanwhile, Mr Li said the company would focus on the mainland market despite its plan to buy its parent China Huaneng Group's Singapore assets.
He added that the parent had no imminent plan to sell to Huaneng its 50 per cent stake in Ozgen, an Australian subsidiary of United States-based power firm Intergen that controls two power plants in Queensland.
Excluding acquisitions, Huaneng had set aside 37.1 billion yuan for capital expenditure for this year, 19.8 billion yuan for next year and 8.9 billion yuan in 2010, Ms Zhou said.