China's Energy Firms Gear up to Meet Demand

BEIJING, Jan. 21 -- China Huaneng Group (Huaneng), the country's largest power producer, plans to increase electricity production 11 percent and coal production 29 percent this year, in a move to meet rising domestic demand.

Power production in 2010 is expected to be 466.5 billion kWh, and coal output 56.86 million tons, the company said Wednesday.

The company hopes to increase its sales revenue to over 200 billion yuan this year, it said.

"We will further expand our portfolio and improve our business structure to increase competitiveness," said Huaneng General Manager Cao Peixi.

Huaneng, which produces approximately 11.6 percent of the country's total energy, increased its power capacity and coal production by 21.5 percent and 75 percent respectively last year.

China's power supply will continue to see solid growth this year, said Xue Jing, director of the statistics and information department under the China Electricity Council (CEC).

Demand for power will rise rapidly this year because of brisk industrial activity, she added.

"China is expected to see a balance between supply and demand this year, but some regions may experience temporary blackouts," she said.

Following a sharp decline in the first half of 2009, demand on power has risen dramatically over the past few months due to increased industrial activity.

"We believe this growth will continue," said Xue.

According to a research report by accounting firm KPMG, electricity consumption in China grew 12.5 percent annually between 2000 and 2008. The high growth rate is expected to continue through 2020.

"The need for additional generating capacity, plus investment in transmission and distribution systems and in energy-efficient technology, is a matter of high priority, given that China has already experienced power cuts due to an inability to meet peak demand", said Terry Chu, power and utilities partner with KPMG in China.

"Expansion in the electricity sector is a basic necessity for China to continue on its economic growth path, and to supply the people," he said.

Household consumption is expected to grow by 50 percent in the next five years as the population experiences a steady increase in the standard of living, he said.

The nation's coal supply, used for power generation, will remain tight in the first half of this year, said Xue from CEC.