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China' coal power plants exposed to bankruptcy , write-downs, bankruptcy - Oxford study



Petroleumworld.com 03 02 2017

An Oxford University study warns that China's utilities could write down between $449 billion and $1.047 trillion in assets over the next 20 years, exposing them to financial risks as the country enacts more intensive pollution controls.

The possible writedowns came as China's top leaders plan massive capacity cuts across industrial sectors and reign in the construction of coal-fired power projects across the country.

China Huaneng Group, China's largest utility, has more than 22,720 megawatts (MW) of new coal generation capacity under construction. These assets face possible devaluations as a result of China's tightening pollution controls and intense price competition for surviving and new power plants, the study said .

Other companies such as China Datang Corp, China Guodian Corp and China Huadian Group are subject to similar risks as they plan to build more than 45,000 MW of new capacity, the study said.

"Financial positions of the top 50 coal-fired power utilities in China is generally getting worse," the study from the Sustainable Finance Programme of Oxford University said. "Chinese utilities have a large reliance on short-term debt, which may introduce additional financial risks of bankruptcy if market conditions were to rapidly deteriorate."

China's government is putting more pressure on the heavily indebted sector. The country's energy regulator has ordered 11 provinces to halt more than 100 coal-fired power projects some of which are under construction, with a combined installed capacity of more than 100 gigawatts.

In another blow, Beijing is also considering radical output cuts of steel and aluminium, hurting electricity demand.

Debt levels for China's five biggest power companies has increased while their margins dropped sharply between 1995 and 2015, the paper said.

Story by Meng Meng and Josephine Mason; Editing by Christian Schmollinger from Reuters

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