By staff reporter Li Qiyan

Huaneng Power International Inc. (SSE: 600011), one of China’s top power producers, reported October 22 third quarter losses of 2.16 billion yuan, worse than expected. The company says the losses were the result of increasing coal prices.

Huaneng recorded consolidated operating revenues of 50.12 billion yuan for the first three quarters of 2008, a 37 percent increase over the same period last year. Despite their growth, net losses reached 2.63 billion yuan by the end of September. Barring a miracle, Huaneng will record its first annual loss this year.

“Huaneng's loss is much larger than the market expectated,” said a senior industry analyst. “The government’s power price adjustments of July and August haven’t had time to show up entirely on the books, so Huneng’s result may revive in the fourth quarter. But there is little chance the company will have a profitable year.”

Huaneng attributes the net loss to the rising costs of fuel coal. Although the government has raised the power supply price two times this year, the adjusted rate still lags behind the market price. If coal prices remain high in the fourth quarter and there are no new price adjustments, losses will continue, said Huaneng.

Huaneng is not the first power producer to report disheartening financial results. On October 10, general manager of China Guodian Co. Meng Tingrong said the company would post big third quarter losses. A senior manger from China Hudian Co. also predicted losses of up to 5 billion yuan for the first three quarters.

Experts are calling for a policy fix to help out the distressed power industry. At an October 8 conference held by the Ministry of Finance, an official from China Electricity Council proposed the government offer subsidies and tax relief to power companies.

But Zhang Ying, chief analyst of Hujie Investment, told Caijing that, with the slowdown of finance revenue growth, a financial subsidy for the power industry is unlikely.

“We predicted that the power industry has reached its lowest level in the third quarter and will revive in the forth due to the recent drop in coal prices and to power price adjustments,” said Zhang, adding, “Power producers’ operations will recover to the level of the first half of 2007 in next year.”