High coal prices slice 65pc off China Resources Power’s interim profit

China Resources Power (CRP) has posted a 65.3 per cent crash in interim profit, crippled by higher coal costs that could not be offset by higher power prices.

The electricity generation unit of conglomerate China Resources (Holdings) recorded net profit of HK$1.85 billion (US$237.7 million) in the year’s first six months, down from HK$5.34 billion in the same period last year.

The profit fall was in line with the 60 to 70 per cent fall the company had indicated in a profit alert issued late last month.

It amounted to 30.9 per cent of the full year HK$6 billion average estimate of 14 analysts polled by Reuters.

An interim dividend of 12.5 HK cents per share is proposed, the same as last year, CRP said in a filing to Hong Kong’s bourse after the morning trading session closed on Wednesday.

CRP shares on Wednesday closed 1 per cent lower at HK$15.3 after the results was released midday, bucking the Hang Seng Index’s 0.9 per cent gain.

“Unless there is a material change in the group’s business, results of operations and financial condition ... the company intends to maintain a stable dividend per share for the three financial years [to December 31, 2018],” it added.

First-half revenue grew 10 per cent to HK$34.1 billion, on the back of a 8.5 per cent rise in electricity output of power plants in which it has controlling stakes.

Higher revenue was despite a surge of direct power sales volume to big users, which attracted a 7.6 per cent discount to state stipulated benchmark prices.

Such sales accounted for 33 per cent of its total first-half sales, from 16.7 per cent in the same period last year.

The discount narrowed from 11.6 per cent in last year’s first half, an indication of a lessening in industry oversupply, which was evidenced also by a 3.4 per cent year on year rise in its coal-fired plants’ usage.

Daiwa Capital Market’s head of utilities and renewables research Dennis Ip said higher coal costs also played a part in the reduced discount.

CRP’s first-half coal cost per unit of output surged 64.5 per cent year-on-year. But its total fuel bill jumped 68 per cent to HK$18 billion, amounting to 62 per cent of total operating cost.

Citing Beijing’s measures to raise coal supply, CRP said it expects coal price to decline in the year’s second half.

With total generating capacity from all fuel sources of 37 giga-watts at the end of June, it is targeting to commission 0.46 GW of wind and solar farms in the year’s second half, and 2 GW of coal-fired plants next year.

It had budgeted HK$13.5 billion in project spending for the whole of this year, of which only HK$4.9 billion was spent in the first-half.

Some HK$2 billion of the budget was for upgrading existing coal-fired plants to cut their emissions, HK$2.6 billion for building more, HK$8.5 billion for installing wind, solar and hydro plants, and HK$400 million for building and upgrading coal mines.

Ip said wind farms could account for as much as half of CRP’s net profit next year. They contributed a third of total operating profit in the first half.