Cost-Cutting and Renewable Energy Expansion Drive Profit Growth for China’s Power State-owned Enterprises

Cost Control and Aggressive Development of Wind and Solar Energy: Profits for Power Central Enterprises!

As of 2024, with the continuous decline in coal prices, domestic thermal power companies are experiencing a “golden period” of profit growth. Annual reports from several listed power central enterprises indicate that significant reductions in fuel costs, alongside accelerated expansion into renewable energy sectors, have led to a substantial increase in net profits across the industry. For instance, Datang Power’s net profit growth rate has even exceeded 200%.

1. Behind the Profit Surge: Falling Coal Prices and Detailed Cost Management

The decline in coal prices has been the primary driver of profitability for thermal power companies. For example, Huaneng International noted an 8.27% year-on-year drop in its average coal procurement price for 2024, with total purchases reaching 207 million tons. This reduction in fuel costs boosted Huaneng International’s net profit by 1.69 billion yuan. Similarly, Guodian Power utilized a strategy of stable supply with 94% of its coal sourced through long-term contracts, successfully reducing the price of benchmark coal to 922.17 yuan per ton (a decrease of 1.37%), leading to a net profit of over 4.1 billion yuan in its thermal power segment. The profitability of leading companies is particularly notable, with Huaneng International exceeding 10 billion yuan in net profits, Guodian Power approaching this mark, and Datang Power achieving a remarkable net profit growth rate of 229.70%.

Interestingly, companies like China Shenhua and Shanghai Energy, which are heavily reliant on coal, saw their net profits decline, highlighting the targeted financial support provided by falling coal prices to the thermal power sector.

2. The Emergence of the New Energy Sector: Rapid Growth in Wind and Solar Installations

While thermal power continues to drive profits, central power enterprises are quickly shifting towards renewable energy initiatives. Datang Power added 6,700 megawatts of new generation capacity in 2024, with over 64% of this coming from wind and solar sources, increasing the share of low-carbon clean energy to 40.37%. China Power is also benefitting significantly from a dual approach of “thermal power plus new energy,” with wind and solar segments increasing their contributions to 3.18 billion yuan and 1.72 billion yuan, respectively, resulting in a net profit surge of 44.24% to 6.54 billion yuan.

Although Huadian International does not have a direct stake in renewable energy, it holds a 31.03% investment in Huadian New Energy Group, yielding a profit of 2.645 billion yuan in 2024. The renewable energy segment is not only adding new revenue but is also becoming a critical component of long-term strategic planning. Guodian Power has set goals for “green upgrades of traditional energy,” while Datang Power is clearly transitioning towards green and low-carbon energy solutions.

3. Future Challenges: How Long Can the Profit Window Last?

Despite the historic profit opportunities presented by decreasing coal prices in 2024, thermal power companies face two major challenges: the pressure to ensure supply and peak regulation due to the expansion of renewable energy installations, and the long-term risks associated with fluctuating electricity prices and rising carbon emission costs. In the short term, the advantage of lower fuel costs is expected to support the profitability of thermal power companies. However, the long-term challenge will be balancing the role of coal power as a stabilizing force with the transition towards renewable energy, which will become the decisive factor in a company’s competitive edge.