Huaneng Power to increase coal supply by 30pc

Huaneng Power International (HPI), the listed unit of Asia's largest power producer by capacity, aims to increase coal supply from its parent company to 30 per cent of its demand in three years from 10 per cent currently to enhance supply security.

HPI also plans to buy China Huaneng Group's coal mines whose combined output capacity is expected to reach 60 million tonnes by this year's end from 45 million tonnes last year, president Liu Guoyue said.

Concentration of the mines in the nation's far north and northwest and the fact that many of the group's power plants are in the east and south coast meant only half of the output was consumed within the group. HPI's coal demand is projected to reach 100 million tonnes this year, of which 15 million tonnes are expected to come from its parent's mines this year.

Coal accounted for two-thirds of HPI's operating costs last year. They are the biggest factor contributing to its plunge to a net loss of 3.94 billion yuan (HK$4.47 billion) in 2008 and the rebound to 4.93 billion yuan of profit last year.

Some 12 per cent of last year's profit came from wholly-owned Tuas Power in Singapore where energy prices are considered less controlled to ensure social stability compared to the mainland.

Acquiring its parent's coal assets will give HPI an integrated production chain, allowing it to hedge its fuel cost risk.

HPI is less aggressive in acquiring coal assets compared to its peers - especially Datang International Power Generation and China Resources Power Holdings.