Huadian International: Big increase in revenue declines trapped by rising coal prices

On August 27, Huadian International announced its 2010 interim report. During the reporting period, the company achieved operating revenue of 21.9 billion yuan, a year-on-year increase of 26.5%; net profit attributable to shareholders of the parent company was 35 million yuan, a year-on-year decrease of 94%. The rise in coal prices is the main reason for the company’s low profit.

Song Zhichen, a researcher in the energy industry at China Investment Advisors, pointed out that in the near future, domestic coal listed companies have issued interim reports, showing that the domestic coal industry in the first half of the year is operating in a good condition and has achieved a substantial increase in profits. While the profits of the coal industry have increased significantly, the domestic first-half performance of power companies has become pale. According to the Huadian International's interim report, the company's operating income increased by 26.5% year-on-year in the first half of the year, mainly because of the significant increase in the company's power generation and electricity sales in the first half of this year. According to statistics, Huadian Power generated 62.522 billion kwh in the first half of this year. , an increase of approximately 24.88% year-on-year; on-grid electricity is 58.206 billion kwh, an increase of approximately 24.99% year-on-year. Driven by the substantial increase in power generation and electricity sales, the company’s revenue in the first half of the year also achieved a substantial increase.

However, in the first half of Huadian Power's operating income increased by 26.5% year-on-year, the company's net profit for the first half of the year was only RMB 35 million, a drop of 94% year-on-year, and it was basically at the margin of losses. The sharp drop in the company's net profit was mainly due to the increase in operating costs in the first half of the year, especially the increase in fuel costs, which directly led to the decline in the company's profitability. In the first half of the year, Huadian Power's fuel cost for electricity generation was approximately 258.84 yuan/MWh, an increase of 19% year-on-year. The total fuel cost reached 15.7 billion yuan, accounting for 78.86% of the total cost. It can be seen that the rise in domestic coal prices in the first half of the year brought huge operating pressure to the company. The change in coal prices directly affects the company's operating performance.

Zhang Yanlin, research director of China Investment Consulting, pointed out that at present, China Huadian International’s coal self-sufficiency ratio is relatively low. Among the top five power generation groups in China, Huadian International has entered the coal industry at a later time. Therefore, the rise in coal prices has brought greater pressure to Huadian Power International. Power Generation Group. Under the circumstances that the on-grid tariffs cannot be adjusted accordingly, the company is under greater pressure to operate. Therefore, Huadian Power should relieve pressure from the rise in coal prices in many aspects. In 2009, the company began to increase investment in the coal sector and plans to increase its coal self-sufficiency rate to 30% in 2013. In addition, the company should also actively expand its coal resources and establish an effective coal reserve mechanism to cope with coal prices. The operational risks that the volatility brings to the company.

The “2010-2015 China Coal Industry Investment Analysis and Prospect Forecast Report” issued by China Investment Advisors pointed out that coal costs account for more than two-thirds of the operating costs of domestic thermal power generation companies, and because domestic electricity prices are limited, they cannot In accordance with the changes in coal prices and market conditions, adjustments have been made. As a result, the performance of domestic thermal power companies is directly tied with the coal price. The change in coal prices will cause thermal power companies to fluctuate significantly in performance.