China Shenhua delays coal power plant construction on orders from Beijing

China Shenhua Energy, the listed unit of the nation’s largest coal miner and one of the largest power producers, has delayed construction on more than 80 per cent of its coal-fired plants after Beijing ordered local governments to stop approving new plants and required producers to slow the development pace on projects already approved.

The policy would help improve worsening decline in coal-fired plants’ utilisation in the past two years amid surging new capacity addition and a rapid decline in power demand growth as China shifts its economic growth focus from heavy industry and fixed assets investments to consumption and services.

“[Beijing] has recently issued a directive to slow the scale and pace of new coal-fired plants construction,” chairman Zhang Yuzhuo told reporters on Tuesday.“This would help restore demand and supply balance.”

The policy bans new approvals in nine provinces, autonomous regions and large municipalities and postpones new approvals in 13 others, according to a Citi report.

For projects already approved, construction will be pushed to next year or later in 15 regions, and where work has already started, completion will be postponed.

“According to the National Energy Administration, China needs to add no more than 190 giga-watt (GW) [of new coal-fired plants in the five year to 2020], while the country has 300GW of capacity either under construction or pending approval,” wrote Citi head of Asia utilities research Pierre Lau, adding that he estimated that some 20 per cent the nation’s total installed capacity is in excess.

The nation had 990GW of coal-fired capacity at the end of last year, whose average utilisation totalled 4,329 hours last year, down 8.7 per cent from 2014 to the lowest since 1978.