Hong Kong company reporting season

Huaneng Power posts 96pc plummet in half-time profit

Net profit came in at US$34.89 million, down from US$918 m in the same period last year, far worse than analysts has expected

PUBLISHED : Wednesday, 02 August, 2017, 8:07am
UPDATED : Wednesday, 02 August, 2017, 8:07am

Huaneng Power International has seen a 96 per cent plunge in interim net profit, on the back of sharply higher coal costs and a lack of power price increases to offset them.

The listed flagship of the nation’s largest power generator China Huaneng Group reported a net profit of 234.9 million yuan (US$34.89 million) for the year’s first six months, down from 6.18 billion yuan (US$918 million) in the same period last year, far worse than analysts has expected.

It was certainly steeper than the 78 per cent decline estimated by Citi’s head of Asia-Pacific utilities research Pierre Lau, and amounted to just 5.7 per cent of the full-year 4.3 billion yuan average profit estimate of 13 analysts polled by Thomson Reuters.

“The profit decline was mainly attributed to surging fuel prices,” the Hong Kong and Shanghai-listed firm said in a filing to Shanghai’s stock exchange late on Tuesday.

Revenue grew 35 per cent to 71.4 billion yuan, helped by a 28 per cent rise in domestic power output from plants in which it has controlling stakes.

The output growth was thanks largely to contribution from plants in the northern Chinese provinces of Shandong, Jilin and Heilongjiang bought late last year from its parent firm that boosted its generation capacity by 18 per cent.

A 3.3 per cent increase in average power selling price also helped lift revenue.

But a surge in coal costs have offset most of the benefits from the acquisition and higher prices.

Total fuel costs rose 59.7 per cent year-on-year to 44 billion yuan.

On a per tonne basis, Lau estimated its average first-half coal costs jumped 54 per cent year-on-year to 756 yuan.

Nearly 90 per cent of the company’s output is fuelled by coal, which accounted for 70 per cent of its total operating cost in the year’s first half.

It also owns plants fuelled by natural gas, solar and wind energy.

In Singapore, where it has a 21.5 per cent share of the power generation market, it posted an operating loss of 295 million yuan for first-half.

At the end of June, Huaneng Power controlled 101.7 giga-watts of installed generation capacity, roughly 6 per cent of the national amount.

Huaneng Power is not alone in reporting sharply lower first-half profit. Fellow state-backed major China Resoures Power last week warned it expected to post later this month a 60 to 70 per cent decline in first-half net profit, again due to higher fuel costs.

But coal-fired generators’ profit prospect is expected to improve in the year’s second-half, since Beijing late June announced plans to cut or cancel various government levies borne by power distributors and end-users, to be coincided with a rise in producers’ wholesale prices from July 1.

So far neither Huaneng Power nor China Resources Power have said how much their selling prices have been raised.

Huaneng Power shares closed 0.2 per cent higher on Tuesday at HK$5.5 ahead of the results, trailing a 0.8 per cent gain of the Hang Seng Index.