Datang International Power Generation looks to fall in coal costs to boost profits

Datang International Power Generation, the listed subsidiary of the nation's second largest power producer, China Datang Group, said yesterday it expects its profits to be helped by lower coal prices again this year.

However, analysts said its earnings outlook was uncertain, given a lack of output growth and weak profits from its non-power businesses.

Datang's vice-chairman, Cao Jingshan, said the company could see its average coal cost per unit of output drop by 3 to 5 per cent this year compared to last year. Some rivals have projected a 5 per cent fall.

Last year Datang saw its cost of coal per unit of output fall 3.6 per cent. The cost of coal took up 69.4 per cent of total operating costs in 2012. Those lower fuel costs helped the company more than double net profit to 4.06 billion yuan for last year, it revealed on Monday. Excluding non-recurring gains, pre-tax profit grew 72 per cent from 2011.

Datang is aiming to generate 200 billion kilowatt-hours (kWh) of power this year, 1 per cent less than last year's 202 billion kWh.

Liu Yan, Datang's general manager of corporate finance and capital management, said the firm has erred on the conservative side when setting this year's target. For comparison, one rival, Huaneng Power International, set itself a target of a 5.8 per cent rise in output.