Chinese power firm Huaneng posts worse than expected 31 per cent fall in interim profit

Huaneng Power International, the listed flagship of the nation’s largest power producer China Huaneng Group, posted a worse than expected 31 per cent year-on-year drop in net profit for the first six months of the year.

The Beijing-based company reported a net profit of 6.18 billion yuan, down from 8.95 billion yuan in the year-earlier period. It was 12.8 per cent lower than the 7.09 billion yuan average estimate of analysts at Citi, Deutsche Bank and Morgan Stanley.

“Most [Hong Kong-listed mainland Chinese] power producers should see first-half net profits below consensus estimates due to tariff and [plant] utilisation cuts,” Citi head of Asia utilities research Pierre Lau in a note ahead of the results.

Huaneng Power is estimated to see an 8.8 per cent decline in net profit to 12.45 billion yuan for the whole of this year, according to the average estimate of 18 analysts polled by Thomson Reuters.

They forecast its net profit to slide further to 11 billion yuan next year and to 7.7 billion yuan in 2018, amid rising industry excess capacity and policy reform that has seen intensifying competition in power selling prices and volumes.

Revenue slid 18.96 per cent year-on-year to 52.92 billion yuan, on the back of a 8.6 per cent decline in power output, as well as lower power prices as a result of a cut to state-stipulated tariffs in January and greater sales of power at lower prices directly negotiated with large industrial end-users.