China Power Producers Fall on Import Concern: Hong Kong Mover

Huaneng Power International Inc. (902) led declines at China’s electricity producers amid speculation the price for coal-fired power may be cut and concern a reported coal import ban may raise costs.

Huaneng Power, the nation’s biggest producer, dropped 8.3 percent, the most since Nov. 6, 2008, to close at HK$7.94 today in Hong Kong. The stock has shed 18 percent in the past three days. Datang International Power Generation Co. (991) declined 4.8 percent to HK$3.41, while Huadian Power International Corp. (816) fell 8.7 percent to HK$3.77.

China’s National Energy Administration is considering a proposal by coal companies to ban imports of the fuel with low-heating values, the Economic Information Daily reported May 16, citing unidentified people. The move will probably increase costs at coastal power producers as they may have to switch to higher-quality imports. China may also cut on-grid power rates for coal-fired plants in the third quarter, Citigroup Inc. analysts, led by Pierre Lau, wrote in a note dated yesterday.

“The possible ban on low-quality coal imports dragged down the shares,” Masterlink Securities Corp. (2856)’s Shanghai-based analyst Li Yan said. “If China is going to cut power rates, it’s because coal prices have declined.”

China may cut the power rates offered to coal-fired plants by 2 percent to 0.008 yuan per kilowatt-hour in the next quarter, the Citi analysts said. They downgraded the rating of Huadian Power to “sell” from “buy” and cut Huaneng Power to “neutral” from “buy” on lower profit outlook.

The benchmark price of Qinhuangdao coal with an energy value of 5,500 kcal/kg was as much as 615 yuan ($99) a ton as of May 19, unchanged from a week earlier, according to data from the China Coal Transport and Distribution Association yesterday. The price dropped on April 21 to the lowest since October 2009, data compiled by Bloomberg shows.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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