China Resources Power Holdings Co., alleged to have deliberately overpaid for coal assets, posted a 78 percent increase in first-half profit as lower prices of the fuel helped reduce costs.
Net income rose to HK$5.33 billion ($687 million), or HK$1.12 a share, for the six months ended June 30 from HK$3 billion, or HK$0.63, a year ago, the company said today in a statement to the Hong Kong stock exchange.
“Supply and demand in the coal market during the first half of 2013 was easing in general, with supply greater than demand,” China Resources said in the statement. “The easing of supply and demand and the decrease in spot coal prices enables us to further control fuel costs.”
China Resources has been buffeted by allegations related to its purchase of three coal mines in Shanxi province in 2010. The official Xinhua News Agency last month posted a letter by one of its reporters claiming the company and its parent’s chairman, Song Lin, deliberately overpaid for the assets, prompting a government audit of the company. A lawsuit by minority investors alleges the board failed to properly assess the mines and that buying them was detrimental to the company. China Resources and Song have denied they acted improperly.
Still, 21 of 28 analysts that track the company rate it a buy and none suggest selling, according to data compiled by Bloomberg.
China Resources fell 6.2 percent to HK$17.54 at the close in Hong Kong. It has gained 7.1 percent in the past year, compared with a 12 percent increase in the benchmark Hang Seng Index.
The three coal mines are high-quality assets and are worth the investment, President Wang Yujun said at a post-earnings briefing in Hong Kong today. One of the mines will start trial production in October and the other two may start trials in 2014, he said.
Amid the controversy, the power generator scrapped a plan last month to combine with group company China Resources Gas Group Ltd. after shareholders rejected the proposal. China Resources Power has no immediate plan to seek a merger with China Resources Gas again, Chief Financial Officer Wang Xiaobin said at the briefing.
State-owned China Resources Holdings Co. is the parent of five listed units in Hong Kong, including China Resources Power. China Resources Enterprise Ltd. produces the country’s best-selling brand of beer with SABMiller Plc.