Shanxi firm to in­vest in UK power plant

China Daily (USA) - - BUSINESS - By ZHENG XIN zhengxin@chi­nadaily.com.cn

A Shanxi-based com­pany prin­ci­pally en­gaged in the coal busi­ness will in­vest 3 bil­lion yuan ($440 mil­lion) in the Hink­ley Point power plant in the United King­dom.

Win­time En­ergy Co Ltd, a com­pany prin­ci­pally en­gaged in the ex­ploita­tion, op­er­a­tion, wash­ing, se­lec­tion and pro­cess­ing of coal, re­cently made the in­vest­ment, to­gether with China Gen­eral Nu­clear Power Cor­po­ra­tion.

The two com­pa­nies are to jointly carry out sev­eral clean en­ergy projects, in­clud­ing Guang­dong Lufeng Power Sta­tion, Hink­ley Point C power plant and some non-nu­clear power plants, ac­cord­ing to a project co­op­er­a­tion agree­ment signed be­tween the two com­pa­nies on Nov 21.

CGN signed a fi­nal agree­ment on the 18 bil­lion pound ($23.4 bil­lion) Hink­ley Point C power plant two months ago with the French util­ity EDF and the Bri­tish govern­ment. The project has been hailed as a gate­way to pro­mote Chi­nese nu­clear tech­nol­ogy.

He Yu, chair­man of CGN, said China’s nu­clear tech­nol­ogy be­ing used abroad will lead to more coun­tries hav­ing con­fi­dence in Chi­nese re­ac­tors and push­ing for­ward its global mar­ket de­vel­op­ment.

Win­time En­ergy, which mainly op­er­ates in the do­mes­tic mar­ket, will be­come a ma­jor part­ner of the Chi­nese in­vest­ment con­sor­tium for the project by lay­ing out 10 per­cent of the to­tal in­vest­ment in Hink­ley Point, which is around 3 bil­lion yuan.

Chi­nese power firms are cur­rently pac­ing up merg­ers and ac­qui­si­tions at home and abroad, motivated by their fi­nan­cial strength, poor do­mes­tic mar­kets and pol­icy sup­port.

“The de­vel­op­ers’ bal­ance sheets are now the strong­est in at least five years, en­hanc­ing their fi­nan­cial strength for merg­ers and ac­qui­si­tions,” said Joseph Ja­co­belli, se­nior an­a­lyst with Asia Util­i­ties and In­fra­struc­ture Re­search of Bloomberg In­tel­li­gence.

“China’s power sup­ply has grown at a pace faster than de­mand, lead­ing to sink­ing plant uti­liza­tion rates, espe­cially for coal-fired power. Govern­ment pol­icy also strongly sup­ports lo­cal power com­pa­nies’ ex­pan­sion abroad.”

Profit re­port­ing shows that the per­for­mance of do­mes­tic coal com­pa­nies turned weaker than ear­lier ex­pec­ta­tions in 2015, due to over­ca­pac­ity, poor de­mand and lower prices, with 39 listed coal com­pa­nies re­port­ing a net loss of 5.1 bil­lion yuan in 2015, plum­met­ing 1,120 per­cent year-on-year.

Win­time En­ergy Co Ltd, to­gether with other 18 com­pa­nies how­ever, still re­ported net profit last year.

The com­pany mainly op­er­ates in Shanxi prov­ince. In ad­di­tion, it is also in­volved in ho­tel busi­ness, as well as the pro­duc­tion and sale of build­ing ma­te­ri­als.

Ac­cord­ing to the com­pany, par­tic­i­pa­tion in the over­seas project, while in ac­cor­dance with the govern­ment’s go­ing global strat­egy and in line with the Belt and Road Ini­tia­tive, still presents cer­tain risks in in­vest­ment de­ci­sion-mak­ing and man­age­ment.

In ad­di­tion, the chal­lenge for Chi­nese en­ter­prises re­lated to the elec­tric power in­dus­try in op­er­at­ing over­seas may also lie with the un­der­stand­ing of the lo­cal mar­ket, espe­cially in de­vel­oped economies such as the UK, said Ja­co­belli.

5.1 bil­lion yuan net loss of 39 listed coal com­pa­nies in 2015

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