Datang International Power still waiting on approval for key restructuring
Datang International Power Generation, under pressure to do its share to help fight air pollution, has budgeted 400 million yuan (HK$501 million) to upgrade 10 coal-fired plants this year, while it awaits Beijing’s approval for an asset restructuring key to its long term profitability.
The listed flagship of China Datang Group, one of the big five state-owned power generation groups, had incorporated “ultra-low emission standards” in all of its new-build power plants, vice-chairman Wu Jing said on Friday, after Beijing imposed tougher standards in July.
We are very serious about our environmental protection obligations
“We are very serious about our environmental protection obligations,” he said, adding Datang International had also upgraded two existing plants last year and expected to complete the upgrading of 10 more this year.
This will help enhance competitiveness of its plants in the longer term, as Beijing encourages power grids to buy the output of more environmentally friendly power plants, while compelling the most pollution-prone ones to shut down as the power market is in surplus supply.
On Wednesday, Datang International posted a 48 per cent drop in net profit drop to 1.77 billion yuan for last year, as profit growth of 34 per cent in power generation to 12.4 billion yuan was more than offset by a 4.83 billion yuan increase in the combined losses of its coal and coal chemical operations.
The loss was mainly due to the booking of 3.2 billion yuan of impairment losses on its coal mining, coal-to-chemicals and coal-to-gas businesses after average coal price dropped some 12 per cent last year and chemical prices fell along with oil prices.
Liu Yan, director of Datang International’s corporate finance and capital management department, said it was still waiting for Beijing to approve its proposed sale of the troubled coal operations to a vehicle set up by Beijing to restructure non-performing state assets.
The restructuring is key to the company because it would enable it to shed baggage that has dragged down its profitability in the past three years. Technical problems that delayed the construction of projects has resulted in massive cost blowouts and kept plant utilisation low.
“The preliminary asset audit and valuation work has been completed and the State-owned Assets Supervision and Administration Commission is pushing the matter forward,” Liu told a press conference on Friday. “But the details, including the transaction price, have not been decided.”
The assets involved include a 26.2 billion yuan plant in Inner Mongolia that turns low-value coal into chemicals, as well as a 25.7 billion project in Inner Mongolia that turns coal into natural gas and a 24.6 billion coal-to-gas facility in Liaoning province.
Datang International’s management said it expects coal prices to fall 3 per cent to 4 per cent this year, which would help lift the profit of its power generation business, although it might be offset by an expected cut in power prices.
