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Hong Kong company reporting season

Huadian Fuxin boss sees higher profit this year amid power pricing pressure

PUBLISHED : Monday, 27 March, 2017, 4:22pm
UPDATED : Monday, 27 March, 2017, 10:47pm

Huadian Fuxin Energy, the alternative energy unit of China Huadian Group – one of the nation’s big five power generators – is expected to see profit growth continue this year despite ongoing pressure on power prices, according Fuxin chairman Fang Zheng.

Higher profit contribution is expected from its nuclear, wind and natural gas-fired plants, offsetting weaker profit from hydro plants, Zheng said in an interview on Monday.

The Beijing-based company has most of its projects in the southeastern province of Fujian.

“We should see a certain degree of profit growth this year as we continue to add wind and solar power capacity while the power grid bottleneck is expected to see some relief,” he said.

“As for our coal-fired units, they should see higher output and dispatch thanks to lower expected hydro power output, but coal costs have also risen so profitability is not entirely clear.”

We should see a certain degree of profit growth this year as we continue to add wind and solar power capacity
Huadian Fuxin Energy chairman Fang Zheng

The company Friday unveiled a 6.3 per cent net profit rise to 2 billion yuan (US$290.6 million) for last year, less than the 2.3 billion yuan average forecast of 16 analysts polled by Thomson Reuters.

Fuxin shares fell as much as 5.3 per cent on Monday, and traded 4.8 per cent lower at HK$1.79 at 2:34pm.

Operating profit from hydro units doubled to 2.6 billion yuan, while that from wind turbines grew 20 per cent to 2.3 billion yuan.

They more than offset a 86 per cent plunge in profit from coal-fired plants, as well as weaker profit from solar and gas-fired units.

The overall profit growth was due mainly to higher-than-usual rainfall that boosted hydro output, which has precedence over pollution-prone coal-fired units.

Wind farm profit was boosted by a 34 per cent jump in output as more turbines were added, which was partly offset by a 7.2 per cent fall in average selling prices due to cuts to subsidised state-stipulated benchmark prices.

Greater sales of output at unregulated discounted prices amid excess capacity in the entire power sector was also a factor.

Fang expects Fuxin’s proportion of wind power output generated but wasted due to grid bottlenecks to fall to below 15 per cent this year from 19.5 per cent last year, after Beijing issued more policy circulars to compel local governments and grid companies to absorb more wind power.

A new “ultra high voltage” power line to send power from Gansu province – which suffered the nation’s worst wind power wastage due to grid bottlenecks – to Hunan province, will also help.

Beijing shuts down its last coal-fired power plant as part of bid to clear air

Solar power profit was hurt by a 6.8 per cent fall in selling prices and grid bottlenecks last year, while Fuxin’s gas-fired power operation was hit by foreign exchange losses from US dollar debt as the yuan depreciated.

Fang expects the gas power operation to see a profit of over 100 million yuan this year, compared to a slight loss last year.

Profit contribution from nuclear plants in which Fuxin holds minority stakes is expected to exceed 600 million yuan this year from 550 million yuan last year, after two reactors came on stream late last year in Fujian.

Still, Fang said amid industry-wide surplus capacity, Beijing’s order for local governments to absorb more nuclear power to help developers means that power prices for output from nuclear plants above 6,500 hours of annual plant utilisation have been slashed.

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