Climate change: Chinese power producers face US$4.2 billion profit squeeze as coal-fired plants get stranded under 2060 goal

Hong Kong-listed power utilities are projected to lose US$3.4 billion while the remainder is attributed to Shanghai and Shenzhen-listed peers

Report offers a warning to global funds that have ploughed US$300 billion of assets into 18 such utilities in mainland and Hong Kong

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A chimney of a coal-fired power plant stands behind a lion statue in Shanghai on October 21, 2021. Photo: Reuters

Published: 12:40pm, 5 Nov 2021Updated: 10:54pm, 5 Nov 2021

Efforts to reach the global net-zero emission target by 2060 could erode US$4.2 billion of profit from mainland Chinese and Hong Kong-listed companies that rely on coal to fire up their power generators, according to a report by CarbonTracker.

Hong Kong-listed power utilities are projected to lose US$3.4 billion while the remainder is attributed to Shanghai and Shenzhen-listed peers, according to the report. That is a warning sign for global funds that have ploughed US$300 billion into 18 such companies, it added.

CarbonTracker measures assets “stranding risk” by projected profit loss due to rising operating costs and declining revenues as governments promote clean energy to replace fossil-fuel in electricity generation. Huaneng Power, Datang International and CLP Holdings are among the biggest power companies listed in Shanghai and Hong Kong.

That scenario envisions global net-zero carbon emissions by 2060, the same target pledged by China, which would require limiting global warming to 1.6 degrees Celsius by 2100, CarbonTracker said in the report. That would necessitate tougher decarbonisation policies by capping or eliminating fossil fuel usage.

“The stranding risks should be a wake-up call to investors,” said Lee Ray and Lorenzo Sani, co-authors of the report published on Thursday. “Shareholders should push management to provide a road map for retiring their coal fleet in line with the beyond-two-degrees scenario.”