Independent power producer Beijing Datang Power Generation believes it will benefit from China's controversial proposal to introduce flat tariffs. Yu Hongji, vice-chairman and president, said yesterday the proposal was likely to enable Datang to raise tariffs because its existing ones were already low. He said the flat tariff mechanism would only hurt power companies with high capital costs and tariffs. 'I don't think the proposal would do harm. It's good for us,' Mr Yu said. 'Our operating costs have been low and our tariffs have been competitive.' In an unexpected public consultation in June, the State Planning and Development Commission issued a circular proposing unified tariffs and a revision to permitted returns and the cost assessment system. Analysts expected that the proposal would reduce producers' average rates of return on new plant investments of 10 per cent to 15 per cent, to a level just above their long-term debt financing cost. Some analysts were dubious about Mr Yu's comments. One analyst at a Europe brokerage said: 'Beijing Datang has quite a number of new power plants. The State Planning circular did not elaborate on the new return formula. 'We will have to wait and see who benefits and who does not.' The flat-tariff proposal, with monopoly State Power Corp's plan to sell some power assets to foreign producers, are part of a sweeping reform of the sector. Mr Yu said Beijing Datang had 'no plan' to acquire any State Power Corp assets, contradicting some analysts' comments that the H share would buy about 13 per cent, or 20 gigawatts, of the 150 GW up for sale. 'We never said Beijing Datang would buy 20 GW of assets from State Power Corp,' he said. 'We're an independent company and State Power Corp has never asked us to buy any of the state assets. 'The most important thing is we haven't heard of any new progress of its reform plan.' Beijing Datang executive director Yang Hongming said the H share was responsible for generating 80 per cent of the new capacity for the west-to-east electricity transmission project. This would create significant synergies for its power plants in Hebei, Shanxi, Yunnan, Gansu, Inner Mongolia and Guangdong, he said. Its primary operating area is the Beijing Tianjin Tanshan service grid. The project will see Guangdong import 10 million kilowatts of electricity by 2005, cutting down on the pollution created by its coal-fired plants. This is despite the fact that local governments are attempting to sour the project to protect their interests in smaller power plants and dam projects. Mr Yang said capital expenditure on Beijing Datang's developing projects would amount to billions in the next few years. 'Funding for the 11 billion yuan [about HK$10.3 billion] will come from internal resources,' he said. 'We have ample room to conduct financing through borrowings since our net gearing ratio is low, at 10.6 per cent.'