China

China Reportedly Plans to Cut Electricity Prices

This article was originally published on March 26, 2015, at 11:27 pm.

Summary:

  • The Chinese government reportedly plans to cut the grid and retail electricity price, according to Xinhua.
  • The cut is expected to be RMB 0.015 per KwH

Why It Matters:

  • The article suggests that the price cut will reduce electricity generators’ profits by as much as RMB 47.3 billion. Currently there are five state-owned power companies dominating the market, namely, China Power Investment Corporation, GD Power Development (CH: 600795), Huadian Power International (CH: 600027), Datang International Power (CH: 601991) and Huaneng Power International (CH: 600011).
  • The price cut is the result of a declining coal price. Xinhua suggests that the coal price has fallen more than 10% in the last year.
  • Industries which consume substantial amounts of electricity, including aluminum and cement, are expected to benefit. Electricity generators are in a strong market position and they are therefore likely to shift a lot of the burden associated with the price cut to coal producers.