China Resources Power Holdings Co., the Hong Kong-listed mainland electricity producer, had its outlook revised to negative by Standard & Poor’s Ratings Services, which cited rising fuel costs.
All the company’s ratings were affirmed, including the BBB corporate credit rating and the BBB- senior unsecured issue rating, S&P said in a statement today. The power producer was put on CreditWatch with negative implications on March 21.
“Soaring coal prices plus delayed adjustments of electricity tariffs have negated the company’s efforts to improve operating efficiency and control costs,” S&P said.
China’s current policy focus on curbing inflation makes it uncertain when and by how much state-capped electricity prices may be adjusted, putting China Resources Power’s financial profile under pressure over the next 12 months, S&P said. The ratings company expects a price increase in or before 2012.
The government raised the price of electricity that grid operators pay power plants in 16 provinces to help generators cope with rising fuel costs, state media including Xinhua News Agency reported yesterday. The increase was the first since November 2009.
Average benchmark prices for power-station coal for immediate delivery at Qinhuangdao, China’s largest port for the fuel, rose 25 percent last year. China Resources Power’s fuel bill increased 21 percent last year, according to its 2010 earnings statement.
The power producer posted a 7.8 percent drop in profit last year. Fuel accounted for 72 percent of its operating expenses.
The shares fell 15 percent in Hong Kong trading in the past year, compared with the 9.9 percent gain in the benchmark Hang Seng Index. China Resources Power dropped 1.3 percent today to close at HK$13.84.