HUANENG Power International yesterday posted an 80 percent fall in first-quarter earnings on surging coal costs.

    Beijing-based Huaneng said in a statement it earned 241.9 million yuan (US$34.6 million) for the three months ended March, down 80 percent from a year earlier, based on domestic accounting standards.

    Domestic power producers are boosting electricity generation to meet growing demand from the world’s largest electricity consumer after the United States.

    But the outlook is overshadowed by record high coal prices and little prospect that an inflation-fearing government will raise tariffs in the near future.

    “Without a power tariff hike, we won’t be surprised to see a sharp fall in the earnings of Chinese power producers, given the 20-30 percent increase in spot coal prices since end-2007,” Taifook analyst Anna Yu said.

    She expects a 53 percent fall in first-half earnings for Huaneng and a 70-80 percent fall for smaller rivals Huadian Power and China Power.

    “But since more than 70 percent of power firms in China sustained losses in the first quarter of this year, it is likely the government will raise power tariffs in the second half of this year,” she said.

    Huaneng has set a target of containing unit fuel cost growth below 18 percent for 2008.

    The company put out 18.6 percent more electricity to 46.1 billion kilowatt hours (kwh) in January-March. It plans to generate 200.8 billion kwh of electricity in 2008, up from 173.7 billion kwh in 2007.

    Huaneng acknowledged its challenges this year included a shortage of coal, a continuous increase in coal prices, a decline in coal quality and intensified competition domestically. (SD-Agencies)