China May Raise Power Price by December, Huaneng Says

By Wang Ying

Nov. 13 (Bloomberg) -- China will probably raise electricity prices for a third time by the end of this year to help narrow losses at power producers, said an official from China Huaneng Group, the nation's biggest state-owned utility.

The increase will unlikely be enough to cover the cost of coal, the official, who declined to be identified because of internal rules, said in Beijing yesterday.

The Chinese government raised power tariffs in August, its second increase this year, after domestic coal prices reached a record in July. The higher prices failed to prevent losses at power utilities. Unit Huaneng Power International Inc. said last month it expects a full-year loss after reporting a third- quarter deficit of 2.2 billion yuan ($322 million).

The higher coal costs and government-capped electricity tariffs have put power producers under operational pressure, the official said. The Chinese government controls fuel prices to limit their impact on inflation.

China Huaneng Group plans to cut annual spending by 5 percent this year because of a ``significant decline'' in nine- month profit, it said on Oct. 28.

To help narrow generators' losses and ease China's power shortages, the government raised the price of electricity sold to grid operators by 6 percent in August. Benchmark domestic coal prices climbed to a record 1,080 yuan a metric ton on July 23, according to data posted on the China Coal Transport and Distribution Association's Web site.

Huaneng Power shares rose as much as 7 percent in Shanghai and traded at 7.10 yuan at 2:38 p.m. local time. The company's Hong Kong shares climbed as much as 5 percent. The stock has tumbled 55 percent this year, compared with the Hang Seng Index's 50 percent drop.

The price of coal purchased under supply contracts will rise 12 percent this year, Chairman Li Xiaopeng said on March 26.

-- Editors: Ang Bee Lin, John Viljoen.

To contact the reporters on this story: Wang Ying in Beijing at wang30@bloomberg.net;