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Coal prices burn into Shenhua earnings

By Yang Ziman (China Daily) Updated: 2016-08-11 08:04

Coal prices burn into Shenhua earnings

Shenhua Group Corp employees check facilities at a substation in Yinchuan, Ningxia Hui autonomous region. [Photo/Xinhua]

China Shenhua Group Corp Ltd, the biggest coal company in the country by output, posted net profit of 9.8 billion yuan ($1.48 billion) in the first half of 2016 on Tuesday, down 18.6 percent from the same period last year.

Shenhua's revenue in the first six months stood at 78.7 billion yuan, down 12.5 percent from the same period last year. The company said that low coal prices were the major reason for the decrease.

Its average coal price was 271 yuan per metric ton in the first half of the year, down 14 percent from the same period last year.

Another reason was the falling power price, which has affected the company's electricity generation sector.

"In spite of the decreasing profit, Shenhua is one of the few coal companies that has been making profits as coal prices keep falling," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

Domestic coal prices have fallen from 870 yuan per ton, the highest level in 2011, to 370 yuan per ton in 2015.

According to the China National Coal Association, the capacity of coal enterprises in China by the end of 2015 was 5.7 billion tons. However, coal consumption in 2015 was only 3.7 billion tons.

"The company uses its own coal to generate power. Lower coal prices have actually contributed to the profits in the power sector," said Lin.

As most coal enterprises reported losses in 2015, Shenhua achieved net profit of 16.1 billion yuan, though it fell by 56.9 percent compared with the end of 2014. Power generation contributed 17.6 billion yuan, or 53 percent, to the net profit.

By the end of 2015, Shenhua's total installed power generation capacity was 54,128 megawatts, up 19.2 percent year-on-year. The average utilization time of its coal-fired units was 4,631 hours in 2015, 302 hours more than the national sector average.

Zhang Yuzhuo, president of Shenhua, said the company's main goal in the 13th Five-Year Plan (2016-20) was clean production of coal, clean coal-fired power generation and clean transformation of coal.

The company has set a goal that by the end of 2017, its coal-fired power generation units, in Beijing, Tianjin, Hebei, the Yangtze Delta region and the Pearl River Delta region, will achieve ultra-low emissions. In other words, its smoke dust, sulfur dioxide and oxynitride emissions will be 50, 30 and 50 percent lower respectively than the national standards.

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