Shenhua Energy raises coal-fired power plant construction budget by 7.5 billion yuan

China Shenhua Energy, the listed flagship of the country’s largest coal miner Shenhua Group, has raised its budget for building coal-fired power plants this year, despite worsening industry overcapacity.

The move comes after being told by local governments that some of its projects will receive guaranteed power dispatch if they are completed by a certain deadline, after which they may have to rely on their own sales efforts to sell the output.

The policy highlights just how considerations between the central and local governments can diverge when it comes to power capacity management.

Asked on Monday if this would worsen the nation’s oversupply of generation capacity – something Beijing is trying to eradicate – and exacerbate a decline in plant utilisation which is at its lowest levels in three decades, the company’s vice-chairman Ling Wen said Shenhua would only push ahead with projects that reach their target expected return rates.

“We have re-examined our project pipeline according to their projected utilisation hours, coal costs, and power grid dispatch volumes,” he told reporters.

“We would only go ahead with projects that meet our internal return-rate requirements.”