Harbin Power expects new orders to get boost from nuclear plants

Harbin Power Equipment, one of the mainland's three leading makers of power generation equipment, expects orders to increase 5.3 per cent this year as it targets contracts from major nuclear projects.

The Heilongjiang-based company may sign about 30 billion yuan worth of orders this year, an increase from 28.5 billion yuan last year, general manager Qu Dazhuang said after the firm's interim results yesterday.

'The central government's environmental protection and energy conservation policies requiring power generators to phase out small and pollution-prone plants opened the way for our customers to issue a slew of tenders for new plants in the first half,' Mr Qu said.

In the first half, Harbin Power's order book swelled by 22.1 billion yuan, up 73 per cent from a year ago. Its uncompleted orders have risen to 72.5 billion yuan from 65 billion yuan at the end of last year.

About 19 billion yuan worth of existing orders are due for delivery this year, to be followed by 30 billion yuan next year and 23.5 billion yuan in 2009 and beyond.

Sales of coal-fired units made up 75 per cent of the company's first-half turnover of 11.96 billion yuan, which rose 2.3 per cent year on year.

Mr Qu said sales of coal-fired generators, the most lucrative of all its businesses, would fall gradually but remain the mainstay because coal was the dominant fuel used by mainland energy producers.

The industry would go through an 'arduous journey' to achieve profitability in nuclear equipment manufacture, as it would take time to cut production and component costs, he said.

'It will come to a point where we can achieve a relatively reasonable profitability,' Mr Qu said, adding it was impossible to estimate the gross margins of nuclear units.

Harbin Power is a contractor of the proposed nuclear plants in Zhejiang and Shandong to which US nuclear firm Westinghouse will provide technology and components.

The company is waiting for procurement and technology transfer talks between mainland nuclear project developers and Westinghouse to end.

The gross margin of Harbin Power's coal-fired equipment rose to 13.5 per cent in the first half, up from 11.1 per cent a year earlier, as that of hydropower units climbed to 10.7 per cent from 7.2 per cent.

Vice-general manager Liu Zhiquan said the higher margins arose from increased in-house design and self-production of high-end parts that the firm previously outsourced.

Harbin Power shares climbed as much as 11.82 per cent before closing 5.75 per cent higher at HK$13.24 yesterday after first-half net profit rose 73 per cent to 615.04 million yuan.