China power firms seek govt subsidy to cover losses
BEIJING, Aug 8 (Reuters) - China's power producers have lobbied Beijing for subsidies to ease the burden of fixed prices for electricity and soaring costs of coal that have pushed generators profit margins into the red.
Subsidies could help ease what is shaping up to be the worst power crisis since 2004 in the world's second-largest electricity market, with generators either unable to find the coal they need or loathe to buy it at such high prices.
China Electricity Council (CEC), a semi-official body representing generating firms, said the government should consider measures such as a rebate of value-added tax and an increase in loans to boost firms' cash flow, CEC said on its website (www.cec.org.cn) late on Thursday.
Such a policy would bring power generators into line with state oil firms, which have been compensated for refining losses caused by soaring crude costs and state-set fuel prices.
Top refiner Sinopec Corp received $4.4 billion in subsidies in the first half of the year, industry sources have said.
The CEC also called for deeper power price reform.
"We suggest that the government continue to ease the conflict between coal and electricity prices to help reverse power firms' loss-making situation as soon as possible," CEC said.
China regulates its electricity tariffs, similar to other energy products like fuel prices, for fear of stoking high inflation and arousing popular resentment.
Beijing last raised on-grid tariffs in July, the first rise in two years, but the increase was widely perceived as too small to cover the increases in coal cost.
The government has largely freed prices of coal, used for more than 80 percent of power generation and prices of which have more than doubled in the past year, eroding the bottom line for electricity producers.
At least two major power producers, Huaneng Power International (0902.HK) and China Power International Development Ltd (2380.HK), have warned investors they may have made losses in the first half of 2008. (Reporting by Chen Aizhu; Editing by Michael Urquhart)
