China to offer 10 bln yuan in subsidies for power sector

Special Report:Global Financial Crisis

BEIJING, Jan.20 -- China is to provide as much

as 10 billion yuan in subsidies to big power companies, the latest effort on the

part of the government to help the country's struggling industries.

The State-owned Assets Supervision and Administration

Commission of the State Council (SASAC) will give the subsidies to the five

leading power generating companies and the two grid companies to cover their

losses caused by last year's snowstorms, the Sichuan earthquake, soaring coal

costs and capped power tariffs, reported China Business Journal, citing an

unnamed source with State Grid Corp of China.

The five power producers are China Huaneng Group,

China Datang Corp, China Guodian Corp, China Huadian Corp and China Power

Investment Corp, and the two grid companies are State Grid and China Southern

Power Grid Co.

The subsidies will come from dividends of the

State-owned enterprises (SOE) paid to the central government in 2008, a source

with State Grid said Monday.

Since 2008, SOEs in oil, power, telecommunications,

coal and tobacco have had to pay a dividend of 10 percent of their profits to

the government.

"The government has planned for over 50 billion yuan

subsidies to SOEs to cover their losses during last year's snowstorms and the

earthquake," said the source, who declined to be named.

The power companies may incur 70 billion yuan losses

in 2008, said Xue Jing, director of the department of statistics and information

under the China Electricity Council (CEC).

Huadian's listed arm Huadian Power International Corp

Ltd earlier said in an earnings alert to shareholders that it expects a loss for

2008. "Although the government raised the electricity price twice in the year,

it still cannot cover our increase in production cost," it said.

(Source: China Daily)