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High coal prices to bleed Huadian
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Huadian Power International Corp Ltd said in an earnings alert to shareholders that it expects a loss for 2008 due to the big increase in coal prices during most of the year.

The company, the listed arm of the country's top power generator China Huadian Corp, gave no specific figure for its loss, only saying that in 2007 it made a profit of 1.2 billion yuan.

"Compared with 2007, thermal coal prices have seen continuous significant rise in 2008. Although the government raised the electricity price twice in the year, it still cannot cover our increase in production cost," Huadian said in a statement to the Shanghai Stock Exchange.

Although most analysts have expected a bad year for China's power generation companies, Huadian was the first among the nation's top five to issue an earnings alert.

The company said in a separate statement that it produced 100.68 billion kWh of electricity in 2008, up 27.12 percent from a year earlier.

Xue Jing, director of the department of statistics and information under China Electricity Council, earlier told China Daily that China's power companies are expected to post a combined loss of 70 billion yuan in 2008.

Escalating coal prices in 2008 have plunged many domestic power companies into the red. These companies were further hit by a drastic fall in demand after the global financial crisis dragged major world economies into a recession.

Analysts predicted that 2009 will be better for China's power companies. "Coal prices have plunged since late last year," said Han Xiaoping, an energy analyst with Beijing Falcon Pioneer Technology Co.

China's five leading power companies have failed to reach agreement with coal producers in drawn-out negotiations on annual supply contracts for 2009. The top five power companies are China Huaneng Group, China Datang Corp, China Guodian Corp, China Huadian Corp and China Power Investment Corp.

Analysts said that coal prices at Qinhuangdao port, a Chinese benchmark in 2009, will be around 400 yuan per ton on average, down by 40 percent from 2008.

Chinese electricity consumption in 2008 rose by only 5.23 percent year on year, the lowest annual growth rate since 1998, according to the China Electricity Council.

The growth rate is 9.57 percentage points lower than 2007 levels, said the association. Total power consumption stood at nearly 3.43 trillion kWh over the full year.

(China Daily January 14, 2009)

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