By staff reporter Li Qiyan

Huaneng Power International Co. Ltd. (SSE: 600011, HKSE: 00902), China's top power producer, posted larger than expected losses for the first half this year. Surging coal prices were the main factor dragging down earnings.

According to Huaneng's interim report published on August 28, the company suffered a net loss of 470.33 million yuan, compared with a net profit of 2.96 billion yuan a year earlier. The loss was equal to 0.04 yuan per share, against a profit of 0.25 yuan per share last year, said the report. 
 
Analysts blame the loss to the unremitting rise of coal prices in China and Huaneng’s reliance on coal-fired power generation.

Huaneng said rising coal prices pushed up its power generation costs by more than 34 percent year on year to 226.78 yuan per kilowatt hours, which offset the company's 31 billion yuan revenue growth from increased production. Huaneng produced 91.45 billion kilowatt hours of electricity in the first six months, a 13.43-percent year on year rise.

At the same time, another major power producer, GD Power Development Co. Ltd. (SSE: 600795), also released first-half results showing a 44-percent year on year decline in net profits. The company posted a net profit of 32.9 million yuan for the first half.

An analyst told Caijing that GD power's capacity of hydropower generation has helped the company avoid loss. Hydropower generation accounts for more than 10 percent of GD Power's overall capacity.

Zhang Yin, chief analyst with Hujie Investment, said that most of the power companies in China – squeezed by the rising costs of coal, and transportation and financial expenses – have suffered losses in the first half. According to Zhang, GD Power has paid 33 percent more on average for a ton of coal in the first half than they did in the same period last year. Huaneng's unit fuel costs also increased 34 percent year on year.

Huaneng said if coal prices remain high and government makes no further price hikes in the third quarter, the company's losses will increase.

China has raised power prices twice this year and slapped temporary controls on coal prices. But these measures have failed to offset power companies' losses.

An analyst expected power companies to see a revival in the forth quarter originating from power price adjustments and dropping coal prices. "However, it will mainly depend on the trend of coal prices," said the analyst.

1 yuan = 14 U.S. cents