Huaneng Power International (HPI) may not meet a targeted 15 per cent return on net fixed assets having already failed to achieve last year's goal of 14 per cent. The company, which listed in Hong Kong this year after listing in New York in 1994, earned 1.66 billion yuan (about HK$1.54 billion) last year. Company vice-president Wang Xiaosong yesterday blamed higher than expected capital expenditure for power plants under construction and slower than expected electricity sales in Fujian province and Shantou city. 'Based on the mainland's prevailing tariff policies, it will be difficult to achieve the allowed 15 per cent rate of return on our net fixed assets this year as stated in our listing prospectus,' he said. HPI raised tariffs by an average 8.2 per cent last year, which fell short of covering its operating expenses and debt service costs. This year, HPI expected to post a lower tariff increase, Mr Wang said. However, analysts said it would be meaningless to gauge a mainland-based power operator solely on the rate of return, given slower than expected electricity demand and a supply glut in regions like Guangdong. 'Rate of return is a benchmark to measure infrastructure firms. But not a meaningful hurdle rate at the present moment. Minimum off-take is no longer applicable in Guangdong amid the oversupply situation,' one analyst said. To aid expansion, Mr Wang said the company would hasten the setting up of new power plants and acquisitions of power plants. Mr Wang said the government was supportive of the company's expansion plan amid sector-wide concerns of oversupply. 'The government is encouraging big operators as part of a nationwide plan to enhance efficiency,' he said. Mr Wang said the State Power Corp, formerly the Ministry of Electric Power, had ordered the closure of power plants with installed capacity of less than 100,000 kilowatts. The aim is to cut 10,860 MW of installed capacity in three years, with Guangdong bearing the brunt of the policy.