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Huaneng Power International Inc ADR repr Class N HNP

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Huaneng’s Q3 Results Beat Expectations on Lower Fuel Cost and Financial Expense

Jennifer Song Equity Analyst

Analyst Note

| Jennifer Song |

Huaneng’s strong third quarter results again beat CapitalIQ annualized and our expectations, with recurring net profit more than doubling to CNY 3.1 billion from a year ago. We think the lower-than-expected fuel cost is the key driver, reflecting Huaneng’s relatively efficient coal purchasing strategy, but we expect its coal cost to rise in the fourth quarter, as the low-cost inventory should have been consumed. Nonetheless, future coal costs are expected to be benign with ample coal supply, and we expect Huaneng’s operating margin to stabilize at around the 14.3% level from 2021. We think the company’s plan to add renewables as China cuts back on coal-fired generation is positive, but we note the potential risk to cash flow.

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Company Profile

Business Description

As one of China’s largest independent power producers, Huaneng Power International develops, constructs, and operates power plants in 26 Chinese provinces, as well as a wholly owned power company in Singapore. Total attributable installed generation capacity in 2019 was 94 gigawatts. Approximately 83% of Huaneng's installed capacity runs on thermal coal, with the remainder running on hydro, wind, and natural gas. The Chinese government owns approximately 46% of outstanding shares.

No. 6 Fuxingmennei Street, Huaneng Building
Beijing, 100031, China, People's Republic of
T +86 1063226999
Sector Utilities
Industry Utilities - Independent Power Producers
Most Recent Earnings Jun 30, 2008
Fiscal Year End Dec 31, 2020
Stock Type
Employees 57,415