The Beijing Business Today reports that rising coal prices have been putting power plants under pressure since the beginning of the year. Some of them have suspended production or even closed down. Datang International Power Generation Co., Ltd. (0991.HK, 601991.SS) posted a third-quarter loss yesterday and called for electricity prices to be increased.

The company report said the business posted a third quarter loss of 433 million yuan (US$63 million). Overall in the first nine months of 2008 Datang has lost 13.94 million yuan. Huaneng Power International Inc. also posted a third-quarter loss of 2.16 billion yuan (US$0.31 billion).

"The company can regain profitability if the electricity price is increased by 0.04 yuan per kilowatt-hour before the end of the year," said Zhai Ruoyu, President of Datang, adding that the company will seek to control production costs by reducing coal consumption and signing new purchase agreements with major coal producers.

He also said the company would try to reduce the negative impact of the world financial crisis through further financing at various levels.

Other power plants echoed the call for a price increase. Zhou Lianqing, Secretary to the President of Huadian Power International Corp. said yesterday that the surging coal price had pushed power plants to the verge of bankruptcy. Even if the electricity price was to rise, most producers would be unable to make up the losses accumulated in the first three quarters. The only way for power plants to turn their losses around would be to receive government aid, raise their prices and hope that coal prices fall.

The fuel cost per unit of electricity rose by 50 percent on average during the first half of the year. To help narrow generators' losses and ease China's power shortages, the government raised the price of electricity sold to grid operators in July and August by 5.46 percent and 5.59 percent respectively. The price reached 0.0178 yuan per kilowatt-hour and 0.02 yuan per kilowatt-hour respectively after the two rises. Another price increase is expected in the near future.

An interest rate cut by the Central Bank may help the generators reduce financial costs, according to industry insiders, especially those plants with projects under construction.

Currently, most power plants are pursuing vertical integration. Huaneng Power International Inc. announced yesterday that it had purchased a 40 percent share in Huating Coal Group to become the second largest share holder of the group.

For more details, please read the complete story in Chinese:

(http://www.bjbusiness.com.cn/site1/bjsb/html/2008-10/28/content_46177.htm)

(China.org.cn by Huang Shan October 28, 2008)