The Vice-President of the State Electric Power Supervisory Commission, Wang Yeping, said that in Hebei, Anhui, and Chongqing, the stockpile of coal for power generation was not even enough to last 7 days. This situation is quite similar to the one that existed in January 2008. Theoretically, a stockpile that is smaller than 7 days supply has reached an "urgent level".
The head of the China Power Investment Corporation, Liu Shuo, confirmed to the China Business News that according to the standard of the National Development and Reform Commission, the average coal stockpile in power plants belonging to the China Power Investment Corporation had dropped to 7.8 days by April 14, and the situation has been deteriorating in recent days.
On the 21st of April, the Bureau of Economic Operations invited the five power corporations to a meeting to take note of the status of their coal stockpiles for power generation. Liu Shuo said that according to the corporations�representatives, their power plants are in the midst of a coal shortage.
The price China has been paying for its coal has been climbing since the end of last year. With the rising price of oil on the international market, the price of coal, which is generally seen as a substitute for oil, has also been rising. The price of coal for power generation imported from Indonesia has increased to $150 per ton. This has been the main cause for the soaring domestic coal prices.
In the domestic market, China produced 2.523 billion ton of coal in 2007, up 8.2%. It generated 3.2559 trillion KW/H of electricity last year, up 14.44%, more than the increase in coal production.
Due to the price rise of coal for power generation, of the 4 major power companies, only Huaneng Corporation has managed to make a profit in the first 3 months of this year. The other 4 power corporations have been loosing money, with loses hovering between 0.4 billion and 0.9 billion Yuan.
For some power companies, the more electricity they generate, the larger the loss they will make, some managers with the Hubei power corporations said that if the corporations only considered the market conditions and did not adhere to their social responsibility, cutting or even stopping the supply of electricity generated might be the most economical choice.
The price of coal has been rising steadily and this trend has showed no sign of coming to a stop. According to statistic from the China Coal and Coke E-Marketplace, after coal prices first began rising in the domestic market around the end of February, coal prices in the three Northeastern provinces also began rising in the end of March. The rising prices have been due to the coal supply shortage.
Some power corporations also confirmed that the price of coal for power generation has once again begun to rise. According to their information, some coal companies have been asking for higher price since the start of April, 15-115 Yuan more per ton than the price in January.
China began to implement the price link between coal and electricity in 2005. This means that if the average coal price rise more than 5% in 6 months, the electricity price has to be adjusted accordingly. Up to now, this measure has been implemented twice, once in April 2005, the other in July 2006.
The electricity price has not changed much after the second adjustment in 2006. According to the State Electricity Regulatory Commission’s calculation in its annual report for 2007, a 1% rise of electricity price will cause 0.089% rise to the CPI.
As the power companies�losses become more and more serious, the power corporations are facing increasingly large problems in their capital chain. The five major power corporations have not been seriously affected due to their good credibility, but small and medium-sized regional power companies will be facing larger difficulties when trying to get their loans.
Apart from adjusting the electricity price, people are also calling for a coordinated profit distribution among power companies as well as more financial support from the government to the power companies.
According to the State Bureaus of Statistics and the China Electricity Council, in January and February, among the 4773 electricity companies in China, 41.69% or 1990 companies are making losses. Liu Nanchang, the vice-Director of the Bureau of Performance Assessment in the State-Owned Assets Supervision and Administration Commission, said that as the price of coal continues to rise in the future, especially the price of coal for power generation, more than 70% of state-owned power plants will make losses.
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