October 23, 2013 / 5:08 AM / 4 years ago

Prices, economy dims China utilities 2013 profit growth

SINGAPORE/HONG KONG, Oct 23 (Reuters) - A government-imposed cut to electricity prices and a slowing economy are set to crimp the profit growth of China’s power producers this year, with only the most cost-efficient likely to remain unscathed.

Companies affected include Huaneng Power International Inc , GD Power Development Co Ltd and SDIC Power Holdings Co Ltd have seen double-digit profit growth in the first nine months of the year as prices of their main fuel coal fell to their lowest in about four years.

Other utilities like Beijing Jingneng Power Co Ltd and Guodian Changyuan Electric Power Co Ltd also flagged positive nine-month profits.

But the drop in coal prices also prompted the planning authority, the National Development and Reform Commission, to issue a notice to power firms to cut on-grid tariffs for thermal electricity, power companies said this month.

Several power companies, including Guodian Changyuan, Guangdong Baolihua New Energy Stock Co Ltd and Jilin Power Share Co Ltd have already said they would lose some profit in 2013.

China’s economy, which is expected to grow at its slowest pace in 23 years in 2013, will add to the pressure on utilities’ 2013 profits.

Datang International, the listed arm of state-owned China Datang Corp, has already posted a two percent drop in its power output in the first nine months of this year, blaming the drop on the easing economy.

Utilities with efficient technologies and access to renewable forms of power generation such as wind energy or hydropower may be able to see profit growth this year, analysts say.

These include Huaneng -- China’s largest listed power producer, which is expected to double its 2013 net profit from a year ago to 11.04 billion yuan, according to a Thomson Reuters I/B/E/S poll of 28 analysts.

“While there might be another tariff cut by year-end under the coal-cost pass-through mechanism, the net incremental impact should largely be offset by falling coal prices and better utilisation,” JP Morgan said in a report. (Editing by Miral Fahmy)

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