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Tariff rise can't offset power producers' losses: Expert

By Wan Zhihong (China Daily)
Updated: 2008-08-22 08:54

The rise in on-grid power tariff which, was introduced on Wednesday, cannot fully offset domestic power producers' losses caused mainly by rising coal prices, industry insiders said.

"The hike can offset some 40 yuan ($5.84) per ton in coal price rise," said Xue Jing, director of the department of statistics and information under China Electricity Council.

"However, coal prices have seen an increase of 140 yuan from January to August of this year, and the price will see a further rise," she said.

The National Development and Reform Commission announced it was to raise on-grid power tariff by 0.02 yuan on average from Wednesday, marking the second rise this year.

The move will shift losses from the balance sheets of power producers onto electricity distributors, Xue said.

The government may not adjust the retail power price in the near future, it was increased recently in July, she said.

China may raise the on-grid power tariffs again in the first quarter of 2009, Zou Xuyuan, an analyst with China Galaxy Securities, said in a recent report.

The soaring coal prices have squeezed domestic power companies' profit margins substantially. In some regions, coal-fired power plants have to reduce production or close, as they cannot afford the rising fuel prices.

Difficulties facing power plants have in some cases caused power shortages in some regions. State Grid Corp of China, which oversees power supplies in 26 provinces, said the present power shortfall in the areas covered by the company was 17.16 gW, nearly five times that of last year.

Figures from the National Bureau of Statistics showed that in the first five months of the year, total profits in the country's power sector were 17.28 billion yuan, down from 59.23 billion yuan in the same period a year earlier.

The country's coal-fired power plants incurred losses of 2.29 billion yuan from January to May, down 108.54 percent year-on-year.

The country's five leading power firms, Huaneng, Datang, Guodian, Huadian and China Power Investment all said their power generation businesses are expected to suffer losses in the first half of the year.