Huaneng Rises in Hong Kong as Net Income Beats Estimates

Huaneng Power International Inc. (600011), a unit of China’s biggest electricity producer, rose in Hong Kong trading after reporting first-half profit that beat analysts’ estimates, helped by higher prices.

The shares advanced 0.3 percent to HK$3.35 at 10:32 a.m. local time. The benchmark Hang Seng Index gained 3.6 percent.

Net income reached 1.1 billion yuan ($171 billion), beating the 706 million-yuan mean estimate of three analysts in a Bloomberg survey. China’s government raised tariffs that grid operators pay power plants in 16 provinces in April to help generators cope with higher fuel costs, according to the official Xinhua News Agency.

“The results certainly beat my expectations,” Michael Parker, a senior research analyst at Sanford C. Bernstein & Co., said by telephone from Hong Kong. “It’s obviously good results, but to the extent of what we’re seeing is a one-time recognition of the adjustment to tariffs, then that’s obviously not sustainable going forward.”

Profit fell 42 percent from a year earlier even as sales increased 31 percent to 64 billion yuan, because of higher fuel expenses. Fuel costs rose 35 percent to 42.9 billion yuan in the first six months, Huaneng said in the statement.

The average first-half spot price of benchmark coal at Qinhuangdao port gained 8.3 percent from a year earlier to 798 yuan a metric ton, data from the China Coal Transport and Distribution Association show. The country burns coal as fuel at more than 70 percent of its power stations.

Huaneng rose 1.3 percent to 4.54 yuan in Shanghai trading. The Shanghai Composite Index gained 1.6 percent.

“What we’re seeing priced into equity markets globally in the past few days has been expectations of continuing global slowdown,” Parker said. “It has affected commodity prices globally and it will affect demand for Chinese manufactured goods and the seaborne price of coal. All of those things should result in a decline in Chinese coal prices, which is beneficial to the power producers.”

--Chua Baizhen. Editors: Ryan Woo, Indranil Ghosh.

To contact the reporter on this story: Chua Baizhen in Beijing at bchua14@bloomberg.net

To contact the editor responsible for this story: Jane, Ching Shen Lee at jalee@bloomberg.net.

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