Chinese Thermal Power Firms’ First-Half Profits Rise as Coal Prices Drop

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Profits of leading listed Chinese thermal power companies saw growth in the first half of the year, driven by a decline in coal prices despite decreases in electricity output and pricing. The combined net profit of Huaneng Power International, Datang International Power Generation, Huadian Power International, Guodian Power Development, and China Power International Development—subsidiaries of China’s five major energy groups—approached 24.7 billion RMB (around 3.5 billion USD), marking their highest earnings since 2016.

All but one of these companies experienced double-digit increases in net profit during this period. Notably, Datang International Power reported over 47% growth, the highest among them. Other thermal power firms with substantial assets, such as Datang Huayin Electric Power, Henan Yuneng Holdings, Jointo Energy Investment, Jinneng Holdings Shanxi Electric Power, and Beijing Jingneng Power, also saw profits more than double compared to the previous year.

The drop in coal prices played a significant role in lowering operational costs and boosting profitability for these companies. According to the China Electric Coal Purchase Price Index, the average closing price of 5,500-kilocalorie coal at Caofeidian Port was 618 RMB (about 86.50 USD) per ton in the second quarter, a decrease of over 20% year-over-year.

As a result, the cost of power generation decreased substantially. The cost of standard coal input at Huadian Power International was 850.74 RMB per ton in the first half, down 13% from the previous year. Likewise, Guodian Power and Huaneng Power International saw reductions of 9.5% and 9.2%, respectively.

These substantial coal price declines offset the negative effects of reduced electricity volumes and lower grid prices. For example, Huadian Power International’s on-grid electricity output fell by 6.5% in the first half compared to the previous year, while the average on-grid electricity price decreased slightly by 1.4%, settling at 517 RMB per megawatt-hour.

Industry experts, such as Lin Boqiang, dean of the China Institute for Energy Policy Studies at Xiamen University, noted that prolonged declines in on-grid electricity volume and prices pose ongoing challenges for companies heavily invested in thermal power. As renewable energy consumption increases annually, thermal power’s role as a primary energy source diminishes, and its utilization hours continue to decrease. This trend makes a reduction in on-grid electricity volume for thermal power firms likely unavoidable.

To remain competitive, coal-fired power producers need to adapt to shifting market demands more effectively. This includes reducing electricity supply during periods of low prices and ramping it up when prices rise, thereby managing the decline in the average energy price received. Enhancing flexibility through upgrades to existing generating units and incorporating new energy storage solutions—such as electrochemical and molten salt thermal storage—can improve their ability to regulate power output, Lin suggested.