CR Power eyes coal mines in Shanxi

China Resources Power Holdings, the fourth-biggest Hong Kong-listed mainland power producer, plans to buy two coal mines in Shanxi province to help ease rising fuel costs and stabilise supply.

The purchases are expected to be finalised this year which would secure long-term and stable supply as well as 'favourable prices' for the group's power plants nearby, chief executive Wang Shuaiting said.

'Coal prices have stabilised, but at a high level,' Mr Wang said after the group's annual general meeting yesterday. 'When the coal mines start production, we will have significant cost savings.'

Average cost of coal jumped 21 per cent last year for generating units of CR Power's 14 power plants. Mr Wang said that in the first four months of this year, unit fuel cost fell 4 per cent after it secured contracts with longer and more favourable terms.

The Shanxi coal mines CR Power plans to buy were estimated to have annual output of about 30 million tonnes, Mr Wang said.

The company also entered a deal last November to develop two partly owned coal mines in Henan reportedly at a total cost of 800 million yuan.

CR Power would keep investing in mines to reduce supply risk even though coal shortages and sharp price rises were expected to ease this year, Mr Wang added.

'On a full-year basis, we aim to keep the unit fuel cost at least the same as last year,' he said.

In the first four months of this year, the average utilisation hour of CR Power's plants was 2.4 per cent lower, better than the management's expectation of 10 per cent because of a sharp rise in new generation capacity.

However, Jiangsu and Henan provinces were hit by electricity oversupply.

Average utilisation hours of power plants in the two provinces varied between 5,000 and 5,500 hours annually, which meant the plants were at most operating at 62 per cent of capacity.

About one-third of CR Power's plants are located in Jiangsu and Henan.

This year, the group's capacity will be boosted 48 per cent, or 2,400 megawatts to 7,300 MW with 12 power generating units in Beijing, Henan and Guangdong due to commission.