Huaneng Power International, the mainland's largest listed power producer, returned to the black in the first quarter with a 127.27 per cent surge in net profit, thanks to the power price rises in the second half last year and lower coal costs. Net profit for the three months to March rose to 549.87 million yuan (HK$623.71 million) from 241.94 million yuan a year earlier, it said in a filing to Shanghai Stock Exchange yesterday. That reversed from a net loss of 3.94 billion yuan for 2008 it announced this month and a net loss of 1.31 billion yuan in the fourth quarter of last year, based on a calculation by UOB Kay Hian analyst Yan Shi. The losses were incurred because of a 46.5 per cent surge in the average cost of coal per unit of output in 2008 and state control over power prices. Huaneng said yesterday the key reason behind the surge in profitability in the first quarter was power price rises in the second half in last year. Turnover for the first quarter increased 19.08 per cent to 16.12 billion yuan from 13.53 billion yuan, outpacing the 16.74 per cent growth in costs of sales to 15.58 billion yuan. This is despite the quarter's output falling 9.28 per cent year on year to 41.82 billion kilowatt-hours as the economic slowdown weakened power demand. 'The result is better than my expectation,' said BOCI analyst Peter Yao. 'We had forecast the company to stop bleeding this year, but had not expected it to rebound so early and by so much.' Mr Yao said the company appeared to have used most of its high-cost inventory and the lowering spot coal price had been helping its profitability. Huaneng has the highest number of power plants in the eastern and southern coastal areas, which are farthest from the nation's main coal-producing regions in the north. It has not directly invested in coal mines, although it can get supply from its ultimate parent, China Huaneng Group, which has stakes in several mines. Coal accounted for 73.7 per cent of Huaneng's operating costs last year. Spot price for coal softened since the middle of last year but contract prices, which are set through negotiations with power producers, have not yet been determined. Negotiations between power and coal producers on this year's coal supply contracts have been in a stalemate for three months. Last year, Huaneng's utilisation hours were 5,246, down 7 per cent year on year. The company has aimed to achieve utilisation hours of 4,900 this year. Separately, Huaneng said it has agreed to buy a 55 per cent stake in YLQ Co-generation from China Huaneng for 1.07 billion yuan. The company has also agreed to purchase a 41 per cent interest in utility Beijing Co-generation from immediate parent Huaneng International Power Development for 1.27 billion yuan. The purchases will be funded by internal resources of the power company. Shares in Huaneng slipped 1.7 per cent to close at HK$5.18 yesterday before the results announcement.