New | Datang Power sees tougher operating conditions in second half as coal price continues to rise
Prospects may improve next year after it sells coal-to-chemical operations
Datang International Power Generation, whose profits have been dragged down for years by steep losses on projects that turn coal into chemicals and natural gas, expects tougher operating conditions in the second half as coal prices continue to rise as power sales competition intensifies.
But it may be able to have a clean separation from the troubled projects by the end of the year and start afresh next year, as it expects to soon complete their sale to its parent.
“After our shareholders approved the sale [on Monday], we will strive to complete the deal before year-end,” president Wang Xin told reporters on Wednesday. “We will no longer be burdened by the projects’ losses and financial risks, so that we can return to the road to sustainable development.”
The Beijing-based listed flagship of China Datang Group – one of the nation’s big five state-owned power generation firms – on Monday posted a 19.1 per cent decline in first-half net profit to 1.71 billion yuan.
Operating profit from power generation edged up 1.7 per cent to 6.13 billion yuan, while coal mining saw its operating loss widen to 336 million yuan from a year-earlier loss of 135.2 million yuan. Operating loss of coal-to-chemical and natural gas operations worsened to 2.24 billion yuan from 1.8 billion yuan.
The company agreed two months ago to sell the hugely loss-making portfolio of coal conversion projects among other assets to its parent for a token one yuan, and agreed to waive 10 billion yuan of loans owed by the troubled businesses to it.
In the early 2000s, the power generator diversified into coal mining and later further ventured into riskier projects that turn coal into chemicals and natural gas – businesses whose commercial viability had not been proven at the time. Technical challenges resulted in low plant utilisation and losses.
