Power Coal Price Rise Threatens Chinese Power Generating Enterprises

Strategic Insights -

A recent seminar in Beijing saw Wang Yonggan, secretary general of the China Electricity Council, warn that power coal price increases this year may lead to across-the-board losses for power generating enterprises in China. The situation could be exacerbated by declining power coal quality. As a result, power coal suppliers and power plants have failed to agree on a coal price for 2006, leading to further price rises. Despite a surplus in power coal supply last year, power generating enterprises still faced significant operating pressures due to coal price hikes.

Key Takeaways:

  • Power coal price increases this year are likely to lead to across-the-board losses for power generating enterprises in China.
  • The situation may be exacerbated by declining power coal quality.
  • Power coal suppliers and power plants have failed to agree on a coal price for 2006.
  • Power coal supply exceeded consumption last year, resulting in a sharp increase in coal inventories.
  • Power generating enterprises faced severe operating pressures in 2005 due to coal price hikes.
  • Statistics showed that power industrial enterprises in China recorded a 25.87 per cent profit plunge in the first four months of 2005.
  • Annual profits of thermal power enterprises only edged up 2 per cent in 2005.
  • Power enterprises as a whole posted a 21.41 per cent profit growth for the whole year in 2005.
  • The coal-electricity price pegging mechanism was implemented on May 1, 2005, contributing to profit growth.

Statistics:

  • Power industrial enterprises in China recorded a 25.87 per cent profit plunge in the first four months of 2005.
  • Annual profits of thermal power enterprises only edged up 2 per cent in 2005.
  • Power enterprises as a whole posted a 21.41 per cent profit growth for the whole year in 2005.
  • Power coal stockpiles reached a several-year high by the end of 2005.
  • The coal-electricity price pegging mechanism was implemented on May 1, 2005.

Sources:

  • "Asia Pulse - Power coal price rises, very likely this year, may lead to across-the-board losses for power generating enterprises in China as electricity prices are not yet market oriented..." (no date specified)
  • "XIC" (no date specified)