Mainland supply tight until 2007, says Datang Power

Improvements will not be seen in the mainland's tight power supply before 2007, according to a Datang International Power Generation executive.

Speaking after the firm reported a 42 per cent year-on-year rise in net profit to 1.11 billion yuan, chief operating officer Yang Hongming said the mainland would need 40,000 megawatts of new generating capacity a year to maintain gross domestic product growth of 8 per cent.

'Given only 30,000 MW of new capacity are estimated to be commissioned in each of the next three years - meaning an annual growth rate of only 7 per cent - we believe overall supply will be on the tight side,' Mr Yang said.

The growth of power supply on the mainland has been lagging behind demand since 2000 as Beijing imposed a moratorium on new plants to reduce excess power capacity.

The divergence between demand and supply growth was the steepest in the first six months of this year, when rationing was the most widespread in the past 10 years, with demand rising 15.8 per cent while supply grew only 3.27 per cent.

Mr Yang expected the company's unit fuel costs to increase 3 per cent to 5 per cent this year while output would rise more than 30 per cent.

The H-share company aimed to reduce its coal consumption per unit of power produced by 1 per cent, he said.

In the second half, Datang expects to commission 2,300 MW of new capacity, bringing its capacity to 10,410 MW at the end of the year.

The new capacity will come from new plants at the mouth of coal mines which will help contain the company's costs.

About 25 per cent of the firm's power production is generated by such plants, rising to 30 per cent by the end of the year.

Datang said capacity was expected to rise further to 12,560 MW by the end of next year and 13,630 MW by the end of 2006.

Mr Yang said the company expected to spend 7.5 billion yuan this year, 6.9 billion yuan next year and five billion yuan in 2006 to expand capacity.

The average cost of plants Datang built in the past two years was lower than the national average by more than 33 per cent, due to better finance management and early completions.

The company plans to issue six billion yuan worth of A shares on the mainland stock market next year to help fund the projects, which will also be 80 per cent financed by bank loans.