Reuters reported that Huaneng Power International, China largest electricity provider, third quarter net profit fell by nearly half from a year ago as higher coal prices eroded profit margins.

Like other listed Chinese power producers, Huaneng outlook is bleak because it cannot pass on soaring coal prices which account for about 70% to 80% of production costs to customers as power tariffs are set by the state.

Analysts say an inflation wary Beijing could keep power tariffs frozen in the near term, even amid speculation that a long-awaited nationwide on-grid power tariff increase is set to come.

The growth rate of power generation is likely to dip in the coming months as a number of Chinese provinces have begun to curb power consumption, especially by energy intensive industries because they want to reach energy saving and emission reduction targets set by Beijing.

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)