Huadian Power International plans to plough at least two billion yuan (HK$2.47 billion) annually into retrofitting its coal-fired plants over the next three years to meet Beijing's tougher emission requirements.
The investment will be covered by higher tariffs the listed unit of China Huadian Group - the mainland's third-largest power generator - will be allowed to charge, said Huadian Power general manager Chen Jianhua.
"From next year's second-half, we need to meet more stringent emission standards that will be in line with those of international advanced levels," he said.
Beijing allows power producers to charge 1.5 fen more for each kilowatt-hour (kWh) after they fit their coal-fired plants with scrubbers to filter out sulphur dioxide, and 0.8 fen more for facilities to capture nitrogen oxides.
Chen expects Huadian's coal cost per unit of output to fall this year by more than the 6.2 per cent decline recorded last year.
Coupled with the firm's target of raising output by 8.3 per cent, he believes the firm will be able to post a higher profit this year.
Huadian Power said last week that its net profit jumped to 1.45 billion yuan from 73.81 million yuan in 2011, thanks to higher power prices and sales volumes, and lower coal costs.
Despite the higher profitability of coal-fired power, coal will account for only a third of the firm's new projects in the next few years, down from about 45 per cent in previous years, as it focuses its expansion on cleaner energy projects such as wind, solar, hydro and biomass power.
It aims to have more than 5,000 megawatts (MW) of such projects by the end of 2015 - over 10 per cent of its total generation capacity, Chen said.
The trend of slower growth in coal-fired plants and faster growth in cleaner energy projects also has implications for power producers such as Harbin Electric in the northeast.
Deputy general manager Liu Zhiquan expects the firm's profit margin to fall this year, as the contribution from loss-making nuclear units, less-lucrative gas-fired units and plant engineering rises at the expense of more profitable coal units.
Losses at its nuclear operations occurred because of order delays after Japan's Fukushima nuclear power disaster and high start-up costs. Liu said the situation will improve "a bit" this year.
Harbin Electric last week posted a 14.7 per cent rise in net profit to 1.41 billion yuan for last year.
Meanwhile, China High Speed Transmission Equipment Group chairman Hu Yueming said this year's demand outlook remains murky, but that he expects weakness in the second half of last year to persist into this year's first quarter, before improving in the rest of the year.
The Nanjing-based wind turbine gearbox maker last week posted a 75.1 per cent drop in net profit to 138.4 million yuan for last year, on the back of a 20.5 per cent fall in sales to 6,600 MW.
It invested some 400 million yuan last year in its lighting, coal mining equipment and electronic control systems businesses, and about 600 million yuan is budgeted for them this year.