<all those commodity prices will be crashing down at the first FED rate hike>
This cat's so far out of the bag, that specs will use a little 25 bps hike as an opportunity to buy the dip and load up on more. It's going to take a whole series of aggressive rate moves.
China Plans $24 Bln Power Plant Expansion This Year (Update1)
Feb. 11 (Bloomberg) -- China plans to spend 200 billion yuan ($24 billion) this year to build plants that generate three times the power used by New York City, in an effort to stop blackouts that threaten to crimp growth, a government official said.
China will this year begin building plants to produce 35 million kilowatts by 2006, said Hao Weiping, an official at the National Development Reform Commission. The government plans to boost capacity by about 35 million kilowatts a year for two decades, from 384.5 million kilowatts at the end of 2003.
Blackouts caused factory closures across two-thirds of the country last summer, including General Motors Corp. and SVA Group plants in Shanghai, as the world's fastest-growing major economy failed to meet power demand from aluminum smelters, automakers and offices. Orders for power equipment may bring a windfall for suppliers such as General Electric Co. and Alstom SA.
``We are doing what we can to make sure China has enough power to sustain economic growth,'' said Beijing-based Hao. ``I don't know of another country besides China that's adding more generating capacity in a single year.''
China plans to start up 144 power stations with 37 million kilowatts of capacity this year, Hao said. More than half of the plants would burn coal, he said, without elaborating.
Even at that rate, there's room for more growth. China, with five times the population of the U.S., has about a third of the generating capacity, according to Edison Electric Institute.
More Blackouts?
Increased competition in China's expanding power industry will be among the topics discussed by delegates attending the Asia Power 2004 conference in Singapore today.
This year, factories and households should prepare for more blackouts as electricity demand races ahead of supply, State Grid Corp., the country's biggest grid operator, said in December. Demand may expand 11 percent this year, State Power Information Network said in December.
``The real blame goes to bad planning,'' said Sarah Zeng, vice president and managing director of El Paso Power Ltd. in China.
China's now-defunct State Economic Trade Commission predicted in 2001 the country's power demand would grow ``a little more than 5 percent'' in the five years to 2005. Last year, power demand expanded 15 percent.
The money spent to increase power output will account for about 5 percent of fixed-asset investment for the next few years in China, said Yang Hongming, executive director and vice president at Beijing Datang Power Generation Co., the second- largest Hong Kong-listed China generator.
Shares, Bonds
China's power needs are luring investors to bond and share sales by units of the former power monopoly, State Power Corp., and Hong Kong-listed generators such as Huaneng Power International Inc., Datang Power and CLP Holdings Ltd.
China Power International, controlled by China Power Investment Corp., one of the five power generators created after the breakup of the power monopoly in 2002, is planning a $1 billion public offer and may sell about 30 percent of the stock overseas, bankers involved in the sale said.
``I think share and debt sales related to China's power companies would be well received because the country's energy demand will probably be strong enough to sustain profit growth,'' said Stella Lau, who helps manage $600 million in assets at East Asia Asset Management Co. in Hong Kong.
Shortages
China Power Investment said last month it will sell 3 billion yuan of bonds to finance construction of four hydropower stations. The parent company also plans a Hong Kong and New York listing, raising as much as $4 billion, Hong Kong's Sing Tao Daily reported earlier, without saying where it got the information.
Hong Kong-based China Resources Power Holdings Co., previously controlled by China's Ministry of Commerce, raised HK$2.58 billion ($331 million) in a public offering in November.
Last year, Hangzhou BC Foods Co., China's biggest Coca-Cola factory, had to shut down for at least two days a week between July and August on government orders to conserve supplies for the rest of Hangzhou city.
The power shortages, which also shut factories run by General Motors, SVA Group and other manufacturers in Shanghai and other cities, followed an acceleration in demand that outstripped government predictions as the economy expanded. SVA makes flat- screen displays for NEC Corp. and DVD players for LG Group.
Nineteen of China's 29 provinces and regions were affected by the blackouts. Last year, China's power use rose 15 percent to a record 1.908 trillion kilowatt-hours as the economy grew at its fastest pace in six years.
Curb Output
China's power shortages are beginning to curb industrial output. Net exports of aluminum may drop for the first time in three years as power shortages and rising raw materials prices force smelters to trim production or even close plants, Wang Feihong, an analyst with industry group Antaike, said last week. Net exports rose 30 percent last year, and fourfold in 2002.
Blackouts disrupted some aluminum factories in Hunan, he said. Electricity accounts for about 40 percent of the cost of making aluminum, used in products from beverage cans to airplanes.
To achieve its capacity expansion target, the government may have to raise power prices amid rising fuel costs, said Alex Fan, Hong Kong-based head of China research at Daiwa Institute of Research.
``Coal prices in China have become relatively deregulated while power prices are still controlled and capped by the government,'' Fan said.
The price of coal, which fuels 74 percent of China's generating capacity, rose 55 percent in eight months in Asia, Merrill Lynch & Co. said in a Dec. 4 report.
Two months ago, power companies including Beijing Datang Group, Datang Power's state-run parent, shut some generators saying they couldn't pay the prices sought by coal producers.
``China must reform its power industry so it doesn't become a bottleneck'' for economic development, said Daiwa's Fan. |
