Some 54 per cent of the nation's 436 coal-fired power plants controlled by the five state-owned generating groups are making losses because of price controls and high coal prices, according to China Power International Development (CPID) chairwoman Li Xiaolin.
Another 85 plants face bankruptcy as their debts equal or exceed their assets.
'If the losses continue, the negative impact on our nation's economy will be unthinkable,' Li said. 'While we should put a lot of emphasis on clean-energy development, we must not overlook conventional, coal-fired power, which accounts for 73 per cent of our nation's generating capacity and 80 per cent of output.'
The dire situation of the coal-fired sector has come about as Beijing has not raised power prices on a nationwide basis since August 2008 while coal prices have been rising every year. An adjustment in late 2009 saw some price rises for plants in less-developed inland provinces and a reduction for plants in richer coastal regions, meaning the five generation groups that have plants nationwide benefited little overall.
Under a power price-setting mechanism that devised in 2005, power prices will be raised if coal costs rise by over 5 per cent in a six-month period, so that 70 per cent of the increased costs would be passed on to power distributors and consumers while generators would bear only 30 per cent. But the system has not been properly implemented as Beijing seeks to contain inflation.
CPID, the smallest by capacity of the five Beijing-controlled power producers listed in Hong Kong, was one of only two that posted earnings higher last year than in 2009. Its 63 per cent stake in a major hydropower project in 2009 saw its net profit rise 57 per cent rise to 866 million yuan last year, excluding a write-down not related to its operation.
