Datang posts first profit in 14 months but sees tough times

PUBLISHED : Tuesday, 26 May, 2009, 12:00am
UPDATED : Tuesday, 26 May, 2009, 12:00am

China Datang Corp, the mainland's second-biggest power producer, posted its first profit in 14 months in April on falling coal costs but warned that the operating environment remained tough.

'There were some positive changes in the company's operation in April and the loss has eased,' the Beijing-based power producer said in a statement on its website, without providing the exact profit figures.

However, it was 'still going through its most difficult time' as the foundation of a rebound was 'not strong enough', said Cai Zhefu, the company's deputy general manager. The state-owned parent company of Datang International Power Generation said the decline in power consumption and output on the mainland persisted during the period.

From January to April, China Datang's power generation rose 4.03 per cent to 110 billion kilowatt-hours, better than the country's average after the company added more capacity, the statement said.

At the end of April, it has installed capacity of 86,794 megawatts.

China Datang also said the utilisation rates of its power generation units were still falling and the company aimed to raise rates to the average level in their respective service areas next month.

Analysts said power producers' profit outlook remained unclear as it was hard to predict when the government would raise power tariffs and the decline in coal costs might not meet the targets of power firms.

According to Citigroup's forecast, coal prices in the spot market may fall 3 per cent this year but contract prices are expected to rise 7.8 per cent. Contract prices are always lower than spot prices.

Meanwhile, the National Bureau of Statistics yesterday said it was wrong to compare economic growth with 'partial' energy consumption numbers.

It was responding to the International Energy Agency, which questioned the country's gross domestic product estimate, given drops in oil and electricity consumption.

The economy expanded 6.1 per cent in the first quarter but total energy consumption only grew 3 per cent. During the period, power consumption fell 4 per cent, according to data from the China Electricity Council.

Electricity use and economic growth numbers in China were not at odds, because first-quarter power consumption dropped mainly on lower heavy-industry output, the bureau said. Service industries, which consume less electricity than heavy manufacturing, grew at a faster pace, contributing more to overall economic expansion, it said.

Harsh environment

Coal prices decline but power consumption and output are also down

From January to April, China Datang's power generation increased: 4.03%