Huaneng earnings fall short of estimate

Huaneng Power International posted a lower than expected 4.83 per cent growth in first-half underlying earnings after the company failed to reach its target for containing increases in fuel costs.

The listed flagship of China Huaneng Group, the mainland's largest power producer, last night said net profit rose 32.7 per cent to 2.87 billion yuan in the period from 2.16 billion yuan a year earlier.

Earnings were bolstered by 673 million yuan gain from investment and asset disposals, with the bulk coming from the sale of shares in Shanghai-listed Yangtze Power. The amount compared with a 66 million yuan investment gain a year earlier.

Excluding investment gains, underlying interim net profit increased to 2.2 billion yuan from 2.1 billion yuan a year earlier. It was less than the 2.33 billion yuan average estimate of three brokerage analysts who did not take disposal gains into account.

Turnover grew 16.6 per cent year on year to 23.14 billion yuan on a 13.8 per cent rise in electricity sales and a 6.4 per cent average increase in tariff to 356.82 yuan per megawatt-hour (MWh).

All of the growth in power sales came from the commissioning of new plants, which more than offset lower utilisation of older plants.

Huaneng Power said average utilisation hours of its generating units 'experienced a slight decrease' year on year. It did not give figures.

Its operating profit margin narrowed to 15 per cent in the first half from 16.8 per cent in the same period last year.

The main culprit was an 8.16 per cent rise in fuel cost per unit of power output to 168.71 yuan per MWh, which exceeded the 5 per cent increase target that management indicated in April.

The company blamed this on a 'deterioration of the quality of coal', as the average price of coal it procured climbed only 7.33 per cent to 367.07 yuan per tonne.

Interest expense jumped 33.8 per cent year on year to 972.27 million yuan. This was due to higher interest rates and an 8.4 per cent rise in total debt to 50.51 billion yuan at the end of June from a year earlier as the company took out more loans to finance new projects.

Huaneng raised its equity-calculated generation capacity 14.8 per cent to 28,187 MW in the 12 months to June. Net debt-to-equity stood at 105 per cent at the end of last year.

Huaneng warned of tougher times ahead despite brisk power demand due to rapid economic expansion and heavy industry output.

'Given that various power generation projects came into operation during the past few years, market competition will continue to intensify and utilisation hours of generating units will decrease further,' the company said.

Huaneng added that it would strive to control coal cost per unit of output to about 8 per cent for the whole of this year.

Huaneng's shares, which have gained 66 per cent in the past 12 months, closed 0.36 per cent lower yesterday at HK$8.12.