China’s 2011 thermal power spending falls 26pct

Monday, 30 January 2012 sourced:Bloomberg

China spent 26 per cent less on building thermal power stations in 2011 than a year earlier as utility profits declined amid rising fuel costs and increases in electricity demand.

Investments in thermal plants, which include coal, oil and gas-fired generators, dropped to 105.4 billion yuan ($16.7bn), according to a report published on the website of the National Energy Administration today.

Profit margins at generators in China, the world’s biggest energy consumer, were squeezed by state-capped electricity tariffs and coal prices that rose to a three-year high in October. The government needs to promote spending in the sector to counter problems of shortages, said Dave Dai, the regional head of clean energy and utilities research at Daiwa Securities Capital Markets Ltd in Hong Kong.

“The fall in investment is mostly due to the power producers’ tough financial situation in the second half,” Dai said in an e-mail. “The government will need to help the producers become more profitable either in terms of tariff hikes or any type of reform to help sustain long-term return, to encourage more investments.”

Total spending for all types of power utilities fell 2.4bn yuan, or 0.3 per cent, to 739.3bn yuan in 2011 from a year earlier, according to the NEA. Nuclear power investments rose 14 per cent to 74bn yuan and hydro power gained 15 per cent to 94bn yuan, it said.

China raised the price of electricity paid to producers on December 1 after freezing tariffs for half a year to contain inflation.

Datang International Power Generation Co’s third-quarter net income fell 54 per cent from the year ago period, according to an October 25 statement to the Shanghai Stock Exchange. expansion.

China’s electricity generation in 2011 climbed 12 per cent to 4.6 trillion kilowatt-hours, according to data released on January 17 by the Beijing-based National Bureau of Statistics.