HONG KONG: Datang International Power Generation, the second largest electricity provider on the mainland, posted a 79 percent drop in earnings last year, weighed down by surging fuel costs and plunge in fourth-quarter power demand.

Net profits of the electricity producer slumped 78.64 percent to 761 million in 2008. Operating revenue, however, jumped 12.43 percent to 36.84 billion yuan. Contributing to the increase: revenue from electricity sales increased by 3.44 billion yuan.

Fuel costs, however, accounting for 66.38 percent of the company's operating costs, rose 47.51 percent, or 7.25 billion yuan. That increase, on the debit side of the ledger, significantly exceeded the growth in operating revenue.

Chairman Zhai Ruoyu said the company and four other major electricity providers in the country have not yet signed contracts with coal mines on the mainland, since there is still no consensus on coal prices this year.

"We expect the coal price should not cost more than our term price in the beginning of 2008," Zhai said at a press conference in Hong Kong yesterday.

While mainland power companies are requesting a 50-yuan cut per tonne from last year's coal price, the coal companies are calling for an increase of 80 yuan per tonne, Zhai added.

Datang may consider purchasing coal from overseas markets, such as Vietnam, Indonesia and Australia, since the price may still be lower than the mainland price, even with transportation costs factored.

Total power generation by Datang climbed 7.12 percent to 126.69 billion kWh in 2008. The electricity producer said it will strive to achieve power generation of 150 billion kWh and an increase of over 20 percent in operating revenue this year.

Vice-chairman Cao Jingshan said the global financial crisis had an adverse impact on demand for electricity on the mainland. Negative growth has slowed in the first two months of 2009. Cao hopes electricity consumption may bounce back in the first quarter and on into April.

Capital expenditures of Datang in 2009 are expected to reach 22 billion yuan, 15 billion yuan of which will be expended on electricity projects. The remaining 5 to 7 billion yuan will be allocated to the non-electrical ventures.

Datang has also announced it intends to raise nearly 5 billion yuan through private placement of around 700 million A shares, priced at 6.33 yuan each. The company will apply the new capital to its nine power projects, which have a price tag of 76 billion yuan.

In line with the 0.89 percent jump in the benchmark Hang Seng Index, shares in Datang rose 2.4 percent, or HK$0.08, to end at HK$3.41 yesterday.

(HK Edition 04/01/2009 page16)