(Yicai Global) Feb. 9 -- Listed Chinese thermal power generators expect their net losses to have narrowed sharply last year from 2021, thanks to higher on-grid electricity tariffs and other favorable policies.

The combined net loss at the 26 firms likely shrank to CNY10 billion (USD1.5 billion) in the 12 months ended Dec. 31, just a quarter of 2021’s CNY40 billion loss, according to their own forecasts. Half predicted better results, with some returning to the black, including GD Power Development.

High coal prices and low electricity costs were the two main factors that squeezed profit margins, but many predicted better earnings thanks to the market-oriented reform of on-grid power tariffs.

GD Power expects a net profit of between CNY2.2 billion and CNY3.2 billion (USD324.1 million and USD471.4 million) last year, the most among its peers, versus a CNY2 billion net loss in 2021. It attributed the turnaround to higher on-grid power tariffs combined with higher power output, with electricity for market-based transactions accounting for 93 percent of the total on-grid electricity the Beijing-based firm generated.

Gepic Energy Development and Anhui Wenergy also mentioned in earnings forecasts that their power-generating revenue rose because of higher average on-grid power tariffs last year.

Inner Mongolia Mengdian Huaneng Thermal Power and Guangzhou Development Group each forecast over CNY1 billion in net profit in 2022.

Huaneng Power International expects to report the biggest loss among thermal power generators at between CNY7 billion and CNY8.4 billion, below 2021’s CNY10.3 billion loss. Datang International Power Generation said its net loss would likely range between CNY400 million and CNY550 million (USD58.9 million and USD81 million), compared with CNY9 billion the year before.

Earnings also improved at the electricity providers as more coal producers used the long-term agreed price mechanism last year, and the installed capacity of new energy sources, including wind and solar power, rose.

Guangzhou Development, Zhejiang Provincial New Energy Investment Group, and Jiangsu New Energy Development all mentioned that increased wind and solar power capacity contributed to better trading results.

But thermal coal prices are still high, prompting concerns among leading industry insiders that earnings may suffer again this year. A manager at a big state-owned power generator told Yicai Global that although regulators had eased restrictions on electricity price increases because of the surging coal costs, the firm was still unable to make ends meet, despite a smaller loss.

“The company will continue to face operational pressure and be short of cash to invest in new energy projects if it suffers losses for a long time,” the manager noted.

The China Electricity Council suggested in November that the country should raise the benchmark price for power generated from burning coal by around 14 percent to CNY0.4335 (6.4 US cents) per kilowatt-hour from CNY0.38 per KWh.

Editors: Tang Shihua, Futura Costaglione