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Eric Ng

Huadian Power International Corp, a Shandong-based power producer, saw quarterly profit almost wiped out by high costs, while surging coal prices more than doubled earnings at Yanzhou Coal Mining.
Huadian, which buys  more than half of its coal consumption in Shandong from Yanzhou Coal, recorded a net profit of 21.78 million yuan (HK$24.25 million) in the three months to March,  down from 274.65 million yuan in the same period a year earlier.
'This is no surprise given Huaneng Power International's 80 per cent year-on-year first-quarter net profit plunge,' said the head of Asia Pacific utilities research at a United States-based brokerage.
'The fact that it is still making a profit is already not bad.'
Huadian's costs should be worse than  those of  Huaneng, the listed unit of China's largest power producer, considering its first-quarter output growth of 60.17 per cent, compared  with 18.62 per cent at Huaneng.
Mainland power firms are  bearing the brunt  of high coal prices as the government tightly controls electricity tariffs as part of its efforts to slow soaring inflation.
Huadian did not disclose its first-quarter fuel cost per unit of output, while that of Huaneng soared 25.92 per cent year on year.
Huadian Power also suffered a worse interest expense burden  stemming from its heavier debts, which rocketed 83.7 per cent to 518 million yuan in the first quarter, compared  with Huaneng's 36.3 per cent rise to 591 million yuan.
Meanwhile, mainland-listed Guangdong Electric Power Development, the biggest operator of power plants in the province, said first-quarter net profit plunged 99 per cent year on year to 2 million yuan, as higher coal prices increased fuel costs.
Yanzhou Coal, the Shandong-based listed unit of the nation's fourth-largest producer of the fuel, posted a net profit of 1.49 billion yuan in the three months to March,  up  212.7 per cent from 700.67 million yuan in the year-earlier period, based on mainland accounting standards.
Turnover jumped 47 per cent  to 5.55 billion yuan on the back of a 45.9 per cent rise   in the average selling price of coal to 599.43 yuan a tonne.
Its main production base in Shandong saw the domestic price increase 48.2 per cent to 600.87 yuan a tonne, while the export price edged up 9.3 per cent to 487.15 yuan.
Gross  margin rose to 57.2 per cent from 52.14 per cent in the year-earlier period, thanks to higher coal prices and cost controls. The cost to produce each tonne of coal  was 210.98 yuan, up 35.94 yuan or 20.5 per cent.
However, some 15.98 yuan of the increment was from workers' retirement insurance and wage surcharges that  were previously booked as general administrative expenses.
Another 8 yuan was provision for a coal price adjustment fund.  Excluding these factors, unit production cost only rose 6.8 per cent.
Raw coal output eased 1 per cent  to 8.98 million tonnes in the quarter, as sales edged up 3.23 per cent to 8.63 million tonnes.



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