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About 43 per cent of Chinese coal power plants produce at a loss

Almost half of coal power plants sold electricity below cost. Even though coal and salaries have increased, the government has maintained its policy of fixed energy costs. About 80 per cent of energy output comes from coal. This year, consumption should rise by 12 per cent.

Beijing (AsiaNews/Agencies) – About 43 per cent of Chinese coal power plants operated at a loss last year because of the government’s price freeze for industrial and residential energy consumption, this despite the rising cost of coal and higher interest rates.

The coal-fired power generation sector saw a 38.8 per cent drop in combined profit in the first 11 months of 2011, the industry's planner and regulator, the National Development and Reform Commission (NDRC), reported. According to a Samsung Securities research report, net profit was 28 billion yuan.

The NDRC said 43 per cent of coal-fired power plants were in the red, up from 35 per cent in 2009. Energy costs are held in check, even below production costs, because of government policy. Even in the more lucrative years of 2005 to 2007, 30 to 38 per cent of the coal-fired power producers made losses.

Losses are due to higher coal prices but also low efficiency. Nevertheless, the profits of the electricity-producing industry, including non-coal power, edged up 3.6 per cent to 82.7 billion yuan in the 11 months.

This was largely due to last year's 19.4 per cent surge in the output of hydropower, which has no fuel cost, thanks to ample rainfall. In 2009, hydropower output had grown only 1.6 per cent.

With fuel costs typically chewing up two-thirds of a power plant's revenues, higher coal prices should be passed onto the consumer in the form of a higher energy bill, but the government has imposed a price freeze to favour industrial output and keep inflation down.

Coal-fired output accounted for 80.7 per cent of the mainland's power generation last year, followed by 16.2 per cent from hydropower and 3 per cent from wind, nuclear and other forms of power.

Power consumption in China, the world's second-largest electricity user, is likely to grow 12 per cent this year, the China Electricity Council (CEC) said, easing off last year's expansion of 14.6 per cent.

CEC also said China would boost capacity this year from 962 GW to 1,040 GW by end of 2011, after closing smaller, inefficient stations.