Earnings at Huaneng Power International, China's largest independent power producer, were eroded by higher fuel costs and a sharply heavier interest burden as it borrowed to finance capacity expansion.
The company last night posted a 32.32 per cent year-on-year decline in interim net profit to 1.67 billion yuan, in line with analysts' expectations after the company issued a profit warning last month.
Interest expenses increased to 723 million yuan in the half, up 196 per cent from 244 million yuan in the same period last year.
This was due largely to a net debt increase from 24.4 billion yuan at the end of last year to 39.74 billion yuan at the end of June.
'The company's profit has been eaten up by interest expense as its capital expenditure is expected to surge from last year's 9.9 billion yuan to 18.5 billion yuan this year,' UBS head of Asian utilities research Alice Hui Suk-fong said.
Huaneng plans to spend a further 14.7 billion yuan next year and 14.2 billion yuan in 2007.
It plans to double its capacity between 2003 and 2008 to 30,000 megawatts (MW).
