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China Huadian Corp, one of the country's "big five" power groups, said yesterday it plans to inject seven generating projects into its listed unit to help it expand as China battles chronic electricity shortages.
State-controlled China Huadian also said it hopes its Hong Kong and Shanghai-traded operation will gain another listing in two to three years, either in London or New York, to tap funding sources for expansion.
He Gong, president of the parent firm and chairman of its listed unit, said the group plans to inject six coal-fired power projects and one hydropower project with a total installed capacity of 8,200 megawatts into Huadian Power International in the next year or two.
"The listed unit has the priority for good quality generation assets," He told Reuters in an interview at the company headquarters.
Four of the projects are in Anhui Province, which is near Shanghai.
"The asset injection will help the listed company expand its service area and improve its asset quality," he said.
Last month, Huadian Power International raised US$233 million through a stock listing in Shanghai. The company's mainland shares shot up 80 per cent on their debut and ended yesterday 63 per cent above their IPO price.
Huadian's Hong Kong-listed shares, however, have fallen nearly 20 per cent over the past year as investors worry about rising coal costs. Also, Huadian's Shandong Province base has excess power supply - unlike many parts of China - pushing down the utilization rates.
Huadian Power International, China's third-largest listed electricity producer, now has total installed capacity of 8,965 megawatts.
Power producers in China, the world's second-largest electricity user, are hastily adding capacity - and raising funds to pay for it - to meet demand generated by breakneck economic growth.
Last summer, two-thirds of the country was plagued by power cuts.
A shortage of coal, which fuels most of China's power generation, is raising prices and squeezing margins for electricity producers.
He Gong said he does not see relief in the near term. Coal prices in China have surged more than 20 per cent in the past year.
"Coal prices are still on the rise. We will continue to see power shortages," said He.
He said that Beijing's soon-to-be launched mechanism linking coal prices to electricity rates will help power producers ease the burden of raging fuel costs.
Huadian Group plans to invest 20 billion yuan (US$2.42 billion) every year to double its capacity to 60,000 megawatts by 2010. It also wants to boost hydropower in its energy mix to up to 25 per cent in five years from 18 per cent now, He said.
(China Daily March 9, 2005)
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