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Coal prices smothering profits at power plants

(Xinhua)
Updated: 2008-07-04 20:06

BEIJING  -- Power plants in China's eastern provinces will face an overall deficit if thermal coal prices rise another 60 yuan (8.75 US dollars) per ton, said the East China Electricity Regulatory Bureau (ECERB) after surveying 64 local power plants.

The profit margin for coal-fired plants has been squeezed by rising thermal coal prices this year. For eastern power plants, the margin is only a bit higher than 0.01 yuan per kilowatt-hour, according to the latest report from ECERB.

These plants would start to lose money if thermal coal prices continue to surge, said the ECERB report.

An earlier report found that 80 percent of China's coal-fired power plants were in deficit in the first five months this year, as thermal coal prices had risen by 60 yuan since the beginning of the year.

To protect power plants' profits, China's top economic planning organ, the National Development and Reform Commission (NDRC), last month raised average electricity tariffs by 0.025 yuan per kw/hr.

The NDRC also imposed temporary controls on the factory prices of thermal coal, capping them at the price on June 19 through the end of the year.

However, prices kept surging. According to the ECERB, the contracted thermal coal prices for provincial power plants have gone up by 9-23 percent in 2008.

Transport costs, which have risen even faster than thermal coal prices, have also put power plants in a tight spot. Due to oil price hikes, the contracted transport fee in most eastern provinces jumped 23 percent from the average price last year, said the ECERB report.