Beijing is mulling a cash injection to bolster ailing power producers that have been hurt by price restrictions to contain inflation amid higher coal costs.
Cao Peixi, the head of the mainland's largest power producer, said Beijing was highly concerned about the industry's financial health.
'Given the power industry's inability to fully pass on higher coal costs to customers, there have been widespread losses among power generators,' said Cao, president of China Huaneng, the parent of listed Huaneng Power International.
'The government has shown great concern and we heard that it is considering a fund injection, but the implementation details are not clear to us.'
Some of the details emerged in a Securities Daily report yesterday. It said the State Council's State-owned Assets Supervision and Administration Commission was planning to transfer a total of 10 billion yuan (HK$12.2 billion) to the five state-owned power firms - including China Huaneng - and the two state-owned power distribution duopolies State Grid Corporation of China and China Southern Power Grid.
The proposed injection would help shore up the finances of power producers, most of whom are highly indebted and have low profitability. However, the amount allocated to each firm appears to be small relative to their balance sheets.
Huaneng Power expects better earnings this year due to lower coal prices. Last year, it posted a 64.7 per cent fall in earnings to 1.18 billion yuan - 29 per cent below analysts' expectation.
Liu Guoyue, the firm's president, said Huaneng Power was targeting a rise in full-year coal costs per unit of power output of not more than 3 per cent, down from 9.2 per cent last year.
The firm said its power plants were profitable in the first two months of this year after a tariff rise in December. They posted a net loss of 142 million yuan in the last quarter of 2011.
We heard that it is considering a fund injection, but the ... details are not clear to us Cao Peixi, president of China Huaneng Group