Reuters reported that China largest power producer, Huaneng Power International posted a 75% drop in Q4 earnings as sharp rises in coal prices offset strong power generation growth.

Like other listed Chinese power producers, Huaneng outlook is blighted by its inability to pass on to customers soaring coal prices which account for about 70% to 80% of production costs, because tariffs are set by the state.

Analysts said coal cost pressures are set to continue, cautioning Huaneng could suffer more than domestic peers because it only started to invest in coal mines last year.

Beijing intent to curb power consumption, especially among energy-intensive industries will also weigh on power firms. Faced with serious environmental problems, China has been implementing stricter energy efficiency and pollution targets, and forcing the closure of wasteful capacity.

It has pledged to cut nationwide energy intensity the amount of fuel needed to generate each unit of gross domestic product by 20% from the 2005 level within five years.

(Sourced from Reuters)