Two China Resources Power plants resume operations

China Resources Power Holdings Co Ltd <0836.hk> has resumed operations at two generating plants shut for two months after the worst snowstorms in half a century disrupted power lines across the country.

The firm shut its Liyujiang power plant and Liyujiang B power plant in southern Hunan province, carrying a combined installed capacity of 1,900 megawatts (MW) -- about 15 percent of the company's total -- in late January.

They resumed full operations at the end of March, a company official with direct knowledge of the situation told Reuters, adding that the firm expects to maintain the same amount of power generation as in 2007 despite the shutdown.

"The impact to our performance this year will not be significant because we have done the annual maintenance and have secured enough fuel for the two plants during the shutdown period," the official said.

"We are very confident we can keep the same generation level as last year, especially because power generated from the plants will be sold to power-hungry Guangdong province," he said.

China Resources turned in the best net profit growth in 2007 among its listed peers, which include Huaneng Power International <0902.hk> <600011.ss> and Datang International Power <0991.hk> <601991.ss>.

But the picture is murkier in 2008 because of resilient coal prices and the two-month disruption.
Neighbouring Guangdong province, China's manufacturing hub, faced a 10-gigawatt shortfall of electricity at the peak of disruptions in March, as harsh weather crippled already rickety power grids. CR Power is a key supplier to that province.

Shares in China Resources Power jumped as much as 12 percent on Wednesday as analysts upgraded the company on solid fundamentals, saying it was their top pick among listed Chinese power firms.

BEST?

Merrill Lynch upgraded China Resources Power to buy from neutral on better cost control and aggressive capacity expansion.

Analysts expect a much tougher situation for power firms this year because of record high coal prices and little chance of an inflation-fearing government raising power tariffs in the near future.

"China Resources Power stays our top pick in the sector." BNP Paribas analyst Daisy Zhang said. "Even in this tough environment, its margins should suffer less than its rivals."

The firm's average unit fuel cost rose 2.3 percent in 2007 from the previous year, significantly lower than bigger rivals Huaneng Power's 10 percent rise and Datang Power's 13 percent jump.

China Resources Power aims to contain the increase of unit fuel costs within 7 percent this year, versus Huaneng's 18 percent and Datang's 12 percent.

And it plans to raise its attributable capacity by 20 percent to 15,OOO MW in 2008, and further raise that to 18,000 MW in 2009 and 21,000 MW in 2010.

The company posted a 36 percent rise in net profit to HK$3.22 billion ($413 million) in 2007 on increased capacity and generation, compared with Huaneng's 1.5 percent rise in 2007 earnings and Datang's 23 percent jump.