Datang International Power Generation Co, the biggest Chinese electricity producer listed in Hong Kong, said profits will improve in the second half as costs ease and power prices rise.

"The next six months will be better than the first half and we've already seen some positive progress," President Cao Jingshan said after a press conference in Hong Kong yesterday.

The cost of power-generation coal will decline compared with the first six months because of government imposed caps, Vice President Zhou Gang said. Datang Power's first-half profit fell 77.5 percent to 406.2 million yuan (US$59 million). China in July said it will cap coal prices at mines at the June 19 levels until the end of the year to help power producers cope with record costs. The Chinese government increased electricity tariffs in July and August because of increased coal prices.

"Coal prices will reach a reasonable level at the end of this year. We are confident about the government's policies in the second half," Cao told Bloomberg News.

Datang Power benefited from a price increase of 0.037 yuan a kilowatt-hour after the Chinese government imposed higher prices, Cao said.

The Beijing-based utility's unit fuel cost to produce each megawatt-hour of electricity may rise as much as 54 percent this year to 200 yuan (US$29.25), Cao said.

(Shanghai Daily August 28, 2008)