By MuyuXu and Shivani S

BEIJING, (Reuters) – Earnings from China’s power utilities have plummeted in the first quarter of 2021 due to rising coal prices that the companies couldn’t pass on.

Huadian Power International (a subsidiary of China Huadian Corp) reported Tuesday profits of the January-September period. They fell 58% to 1.6billion yuan ($251million), with a loss of 1.8billion yuan in the third quarter.

Huaneng Power International, listed under China Huaneng Group (NYSE:), also stated that the company’s earnings for the first nine months fell by 91% to 783.9million Yuan. The third quarter saw a loss in earnings of 3.5 billion Yuan.

Both firms blamed their losses on rising power demand and a rise in coal prices. Huadian clearly stated that the decrease in net profits was due to the increase in thermal coal price.

Investors can also be prepared for losses by using other power generators.

Huadian Energy is also part Huadian Group and forecasts a net loss of 522.9 millions yuan in January-September compared to 173.1 million losses a year prior. Earnings will be reported by the company on October 29.

Datang International Power Generation (part of China Datang Corp) said that profits for the first nine months may drop by as much as 100%, from 2.67 billion Yuan a year ago. On Oct. 28, earnings will be made public.

(For graphics on China utilities – https://fingfx.thomsonreuters.com/gfx/ce/jnpwewoyzpw/Pasted%20image%201635299429312.png)

Chinese power generation companies remain dependent on coal more than half of the time despite years-long efforts by Beijing to improve renewable power projects.

China’s coal prices rose nearly 190% in 2018 due to tight supply. This is due to stringent safety inspections, anti-corruption probes at key mining areas and heavy rains that submerge dozens of coalmines in northern parts of the country.

(For graphics on China’s total power use climbed nearly 14% in Jan-Sep 2021 from the same period in 2020 – https://fingfx.thomsonreuters.com/gfx/ce/zdpxorjzrvx/ChinaPowerSince2019.png)

Huadian Power International stated that operating costs increased 38% in the first 3 quarters of this year, while Huaneng Power International noted that costs rose 37% over the same period.

However, they claimed that power tariffs increased less than 5% in the first nine month of 2021 compared to a year earlier, despite an increase in electricity sales.

According to analysts, the majority of China’s coal-fired power stations are losing money. Meanwhile, since July, the National Energy Administration has warned that many power companies in northeastern and northwestern China face operational problems due to coal shortages.

China stated earlier in the month it would set a market price for all coal-fired power plants and let firms pass on more cost to certain customers.

CITIC’s analysts estimated, however, that any power tariff increase would not make the majority of coal power plants financially viable based on the current coal price, which has fallen 15% since the government promised to manage them.

(For graphic on China spot and futures coal prices – https://fingfx.thomsonreuters.com/gfx/ce/myvmngrgapr/Pasted%20image%201635302435018.png)

The increase in the power tariff could reduce coal prices by up to 179 yuan a tonne. However, spot prices at Qinhuangdao port (a major hub for coal transportation) have risen by 437 yuan a tonne this past year, according to CITIC.

($1 = 6.3844)