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Power Firms Expect Capital Injection

11-27 16:20 Caijing Magazine

China's distressed power industry is expecting substantial subsidies from the central government to pull through the financial crisis.

By staff reporter Li Qiyan

From Caijing Online

China’s long-suffering power companies are expecting a multi-billion yuan capital injection from the central government after the State Council approved a budget to aid state-owned enterprises (SOEs) hurt by the economic slowdown.


On November 26, the State-owned Assets Supervision and Administration Commission (SASAC), which oversees more than 150 large state-owned companies, announced that the State Council has approved the spending of 54.8 billion yuan to help state-owned firms pull through the financial crisis.


According to the SASAC, some 27 billion yuan, or about 49 percent of the budget will be spent on increasing the assets of SOEs key to the livelihood of the people and national economic security. SOEs which suffered great losses in this year's natural disasters will receive compensation of 19.63 billion yuan, or 36 percent of the budget. The budget also included 8.15 billion yuan to help SOEs support business development.


The budget has raised hopes of substantial subsidies amongst China’s power and grid companies.


A manager from the State Grid Co. told Caijing that “we have heard the news.” But companies are still waiting for details of the subsidy plan from SASAC, according to the source.


“It is good news for power companies,” said Wang Yonggang, secretary general of China Electricity Council (CEC). According to Wang, China’s power industry has been hurt badly by both a string of natural disasters earlier this year as well rising coal prices. The CEC has already several times requested financial support for the power industry from the Ministry of Finance and the National Development and Reform Commission.  


According to the CEC, the snow storms at the beginning of the year resulted in a 10.5 billion yuan loss for the State Grid Co. and a 5 billion yuan loss for Southern Grid. At the same time, major state-owned power companies endured losses of 61.3 billion yuan during the disaster. On top of this the May earthquake in Sichuan resulted in another 12 billion yuan direct loss for the State Grid.


Moreover, with the rising price of coal, power companies’ profits have been further squeezed since the start of this year. During the first eight months, the entire coal-fired power generation industry reported a 21.6 billion yuan loss.

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