Government authorities working on coal-power price linkage
The National Development and Reform Commission (NDRC) is to work on promoting coal-power price linkage on further decline in coal prices, said Xu Kunlin, head of the Price Bureau of NDRC.
According to statistics from Wind, the price for 5,000-kilocalorie power coal at Qinhuangdao port averaged at 372.47 yuan/tonne in the first three quarters of 2015, declining 17.68 percent on year to 452.45 yuan/tonne.
As pointed in the Guidance for Deepening Reforms in Power Coal Market released by NDRC in December of 2012, China would accordingly adjust on-grid electricity price when power coal price fluctuates more than 5 percent, and power companies would have to undertake 10 percent of the cost of coal price fluctuation. Coal price decline has led to great difficulties of coal mining enterprises.
According to statistics, operating revenue of the 30 listed coal mining companies in China totaled 420 billion yuan in the first three quarter, down 23.84 percent on year, and their net profit totaled 8.414 billion yuan, plunging 76.16 percent on year. Among the 30 listed companies, 14 companies incurred losses.
Thermal power companies reported good performance in Q3
Statistics from Wind showed that none of the 27 thermal power companies in China incurred losses in the first three quarters, and they achieved total operating revenue of 439.645 billion yuan, down 3.24 percent, and total net profit of 54.58 billion yuan, up 17.86 percent on year.
The profitability of thermal power companies has been enormously enhanced with 12.46 percent of return on equity and 29.29 percent of gross profit margin in the first three quarters. As on-grid electricity price basically did not changed in the first three quarters, the enhanced profitability was mainly attributed to cost decline caused by coal price plunges. The operating cost of listed thermal power companies totaled 310.8 billion yuan in the period, down 7.1 percent from a year ago.
Coal-power price linkage to affect revenue of thermal power companies
The expected re-start of coal-power price linkage would lead to a cut in on-grid electricity prices, which would definitely affected the revenue and net profit of thermal power companies. Oriental Securities estimated that the on-grid price cut may average at 3 cents.
Assuming that the 27 listed power companies maintained stable electricity sales in 2016, the on-grid price cut would reduce their revenue by 22 billion yuan if China initiates coal-power price linkage at the end of this year. However, revenue from other forms of power generation of these power companies would help to offset the negative impact of on-grid price cut.
Currently, most listed thermal power companies are actively developing new energy power generation business, and are likely to add weight in new energy power generation in future. Huaneng Power International, Inc. (600011.SH; 0902.HK; HNP.NYSE) noted in its semi annual report for 2015 that the clean energy installed capacity had weighed 11.48 percent in its total installed capacity.
Latest comments