Tests for HPI power play in Singapore

Chinese electricity giant points to challenges ahead for offshore offshoot as more generating capacity comes on stream in the city state

PUBLISHED : Friday, 22 March, 2013, 12:00am
UPDATED : Friday, 22 March, 2013, 4:49am


Huaneng Power International (HPI) warned that its Singapore unit, Tuas Power, would face more challenges this year after losing market share last year.

HPI, the listed unit of China's biggest power producer, China Huaneng, had its share of electricity generation in Singapore fall to 25.2 per cent last year from 27.1 per cent in 2011.

Chief accountant Zhou Hui said Tuas enjoyed good profits owing to tight power supply in the first few years after HPI bought it for US$3 billion in 2008.

"Due to the commissioning of new power-generating capacity in Singapore, supply has increased, and the power price has fallen by 0.8 Singapore cent [per kilowatt-hour]," she said. "This year, another 2.5 gigawatts of new capacity will come on stream … so industry returns are returning to normal levels."

The city state had 9.9 GW of total power generation capacity at the end of March last year, its Energy Market Authority said.

With 2.67 GW of capacity, Tuas accounted for 4.7 per cent of HPI's total equity-calculated generation capacity but contributed 18 per cent of its net profit last year. Tuas' net profit fell 18.8 per cent last year to 1.04 billion yuan (HK$1.3 billion). Daiwa Securities head of Asia utilities research Dave Dai said HPI expected Tuas' return on equity to fall from 17 per cent last year to 10 to 12 per cent in a few years.

HPI posted on Tuesday a 367 per cent rise in net profit to 5.51 billion yuan for last year, thanks to a 7.6 per cent fall in fuel cost per unit of power sold and a 5.6 per cent increase in average selling price. These were partly offset by a 3.55 per cent drop in total domestic output, missing by a wide margin its target set a year ago of growing it by 8.4 per cent.

The fall was due to weaker demand growth, rising supply and high hydropower growth in areas where HPI operates. National power demand rose 5.5 per cent last year. HPI's weak output growth was reflected in a 7.9 per cent fall in average utilisation of its coal-fired plants to 5,114 hours. Coal-fired plants accounted for almost 90 per cent of its total generating capacity.

The firm aims to raise total power output by 5.8 per cent this year and achieve average utilisation of 5,070 hours at its domestic power plants.

President Liu Guoyue expects HPI's coal cost per unit of power sold to fall 5 per cent this year.

HPI aims to raise its generating capacity by 4.59 GW this year, or 7 per cent of the total at the end of last year. It aims to have 80 GW of capacity by the end of 2015. This represents 8.4 per cent average annual growth in the three years to 2015, compared with 9.2 per cent in the three years to last year.

Sanford Bernstein senior analyst Michael Parker said the 2015 target was surprisingly high, given the industry was "structurally decelerating" in demand growth.