New plans for power sector

By Chen Yang (Global Times) 08:06, June 20, 2012 The State Electricity Regulatory Commission yesterday published details of its plan toencourage private investment to enter the power sector, an area mainly dominated byStateowned companies. The move is intended to address the slowdown of investment in the country's thermalpower pla nts, experts said. Private investment will be given equal access to the power industry, such as electricitygeneratio n, design and construction businesses, the commission said in a statement onits website yester day. The commission will also ensure that private power plants can enjoy the sameelectricity pricing policy as State-owned ones, the statement said. The statement came after the National Development and Reform Commission, China'stop econ omic planner, warned last week that investment in thermal power plants, amajor source for the c ountry's electricity supply, fell by 29.3 percent year-on-year in thefirst four months of 2012. "The move will encourage more private capital to enter the sector, and increasingcompetition is also beneficial for electricity pricing reform," Cai Wenbin, an industryanalyst at Shanxibased Datong Securities, told the Global Times yesterday. Private investment was allowed to enter China's power generation industry as early as1985, an d many foreign power companies swarmed into the sector during the 1990s.However, foreign in vestment began to fade out of the sector around 2002 due to lowreturns on investment, Lin Boqi ang, director of the China Center for Energy EconomicsResearch at Xiamen University, told the Global Times yesterday. Private capital will still be cautious in entering the power generation sector, mainlybecause retur ns on investment remain low, Lin said. Seven power companies listed on the Shanghai and Shenzhen Ashare markets haveposted warnings of losses for the first half. Guodian Changyuan Electric Po wer Co, forexample, forecast a loss up to 185 million yuan ($29.1 million) in the first half of 2012 ,mainly due to decreasing electricity demand. Despite the opening up of the power generation sector, Cai said power grids are stillmonopolize d by State-owned companies. "Electricity distribution concerns national security, so the government is still cautiousabout openi ng up the sector," Li Ying, chief economist of the State Grid EnergyResearch Institute, told the Global Times yesterday. "Only some parts of the electricity distribution sector can be opened up to privateinvestment, su ch as engineering for power plant interconnections," he said. Li noted that private investment can participate in the electricity distribution sectorthrough other ways, such as buying shares in State-

owned power grid companies whenthey go public, or buying corporate bonds issued by the Stat e-owned companies.