Chinese power producers seen taking a hit from surging coal prices to meet winter demand with no sign of tariff hike

Name: Power crisis in China leaves highway in the dark
Uploaded: 2021-09-29T07:01:09.000Z
Duration: 1 min 36 s
Description: Power crisis in China leaves highway in the dark

Shrinking stockpiles and near-record coal prices are likely to erode profits at electricity producers

Expectations are building up for a temporary tariff hike to alleviate the pain but analysts see no sign of that happening yet

Reading Time:2 minutes

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Several mainland provinces announced electricity curbs on sectors with high energy intensity and emissions in mid-September, including economic powerhouses Guangdong and Zhejiang, triggering outages in factories and residential homes. Photo: Weibo

Yujie Xuein Shenzhen

Published: 3:01pm, 29 Sep 2021

China’s efforts to conserve energy for the winter season and control emissions are hurting manufacturers as much as the nation’s power-generating companies amid surging coal prices. A tariff hike may be needed to ease the pain.

Shrinking stockpiles, near-record coal prices and rigid power tariffs are likely to erode the profitability of electricity producers when plants are expected to ramp up supply to meet demand during the winter. So far, many local companies have warned of losses as many provincial governments slammed the brakes on electricity production.

“Given the rather acute situation right now, many coal-fired plants will be required to be brought back on line to ensure supply,” said Qin Yan, lead carbon analyst at financial data provider Refinitiv. “There’s a fight for coal supply with stockpiles at extremely low [level]. Power companies are paying high coal prices, so their profitability [will be] much reduced.”

Shares of Huaneng Power , the listed unit of the mainland‘s largest power generator China Huaneng Group, tumbled 3.7 per cent in Hong Kong trading on Wednesday, while another power-generation giant Datang Group slumped 7.3 per cent. Peers including Huadian Power sank earlier this week with big and small manufacturers amid outages and production curbs.

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Power crisis in China leaves highway in the dark

The distress underscores China’s crackdown on energy-intensive industries under its “dual control” policy of restraining power consumption within 20 per cent in the first half, as well as meeting certain emission-control targets under its carbon-neutrality drive.

The National Development and Reform Commission last month warned 10 provinces, namely Guangdong, Jiangsu, Yunnan, Fujian, Shaanxi, Guangxi, Ningxia, Qinghai, Xinjiang and Hubei - some of the nation’s biggest manufacturing hubs - for failing to comply with the power policy.

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