China Power International Development Holding, one of the biggest national independent power producers, plunged to a 249.38 million yuan (HK$284.52 million) loss in the first half on higher than expected coal costs.
The loss was slightly less than the 250 million yuan to 300 million yuan analysts had forecast. But the group's average coal price swelled an unexpected 27.3 per cent and operating profit tumbled nearly 90 per cent to 23.42 million yuan.
China Power joined its bigger peers, Huaneng Power International and Huadian Power International Corp, posting losses for the first time since going public in Hong Kong. Datang International Power Generation, the biggest independent power producer listed in Hong Kong by market value, fared better with a 77 per cent drop in interim profit.
Punishing coal costs and a two-year power price freeze that lasted until June 30 were the culprits. 'The operations and development of the group have encountered unprecedented challenges and pressures,' China Power chairman Li Xiaolin, the daughter of former premier Li Peng, said.
She added that the group would pursue lower financing costs and expand its funding sources while co-operating with suppliers for a reliable supply of coal in the second half.
Some analysts estimated that China Power was likely to return to the black on a full-year basis after the central government thawed a two-year ban on tariff increases in July. It has allowed two rounds of increases in the past two months. 'It has a good chance to post a profit this year partly because we have seen that China Power's tariff increase was higher than the industry average,' an analyst with a European brokerage said.
In July, China Power was allowed to raise tariffs 8.5 per cent, which was above the industry-wide increase of 2.5 fen per kilowatt-hour or 4.7 per cent.
A fresh round of tariff increases may be on the cards. China Ferroalloys Industry Association secretary-general Zhang Zengchan was negotiating with government officials about lifting prices by 2.5 fen per kilowatt-hour, according to Bloomberg.
In the first half, China Power's overall fuel costs, which accounted for 75.38 per cent of its total operating costs, surged 70.48 per cent to 3.03 billion yuan. The increase was the result of commissioning new generation units, higher coal consumption and a 27.3 per cent rise in average coal prices.
This helped jack up the group's unit fuel cost 23.89 per cent to 193 yuan per megawatt-hour.
China Power was also hurt by higher financing costs, which skyrocketed 278.46 per cent to 261.63 million yuan. Interest rates rose as a large portion of its interest expense was no longer capitalised following the commissioning of new units.
The units, including the first 640 megawatt super-critical generation unit at Huanggang Dabieshan power plant, boosted the group's turnover by 47.29 per cent to 4.04 billion yuan in the first half.
The firm's loss per share stood at 7 fen against earnings of 2 fen previously.