Profit at power firm Datang dragged down by coal-to-chemicals unit
Datang International Power Generation posted an underlying pre-tax profit growth of 54 per cent for last year, but its net profit dropped 12.2 per cent to 3.53 billion yuan (HK$4.45 billion), and it expects its coal-to-chemicals business to remain a loss-making operation this year.
The Beijing-based listed unit of China Datang Group is one of the five state-owned national power generation groups and its coal-to-chemicals operation was a factor in dragging down profits in 2013.
Excluding a 241.5 million yuan write-down on its investment in shares of Hong Kong-listed Inner Mongolia Yitai Coal, a 1.26 billion yuan write-down on power and coal assets, and a 1.3 billion yuan gain on asset disposals in 2012, pre-tax profit would have risen 53.9 per cent to 9.6 billion yuan.
Coal production operating profit plunged 72.8 per cent to 462.9 million yuan, due to an 18.2 per cent fall in output, oversupply and lower selling prices. Its coal-to-chemicals business had an operating loss of 2.2 billion yuan, compared with a profit of 108 million yuan in 2012, as it booked large depreciation and interest costs after commercial operations began last year.
Li Anxue, vice-general manager of the chemical unit, said its plant in Inner Mongolia that turns coal into polypropylene and other chemicals needed 80 per cent utilisation to break-even. This year, it aims to achieve 65 per cent utilisation, compared with 46 per cent last year. The project was originally due to start in late 2008, but the technical issues meant it had to go through several years of trials.
Dave Dai, head of regional clean energy and utilities research at Daiwa Securities, expects the project to be loss-making in 2014 and 2015, with the current polypropylene price of 11,000 yuan a tonne below the 12,000 yuan level where it would break even.
Its power generation business saw operating profit surge 69 per cent to 9.5 billion yuan on the back of an 18.7 per cent fall in coal costs per unit of output. This more than offset a 2.2 per cent decline in output to 192 billion kilowatt-hours.