China Yangtze Power Co, which sells electricity generated from the world's largest dam, said it made better-than-expected profits last year and expects a stronger performance this year as its generators spin more electricity.

Income from the company's core business totaled 2.99 billion yuan (US$360 million), while net profits came in at 1.44 billion yuan (US$173 million), said Li Yongan, chairman of the company.

China Yangtze Power Co was also listed on the Shanghai Stock Exchange late last year.

Earnings per share stood at 0.251 yuan (3 US cents), outstripping a projected 0.24 yuan (2.9 US cents) value.

Li said the results were in stark contrast to the previous year, due to factors like price changes and the purchase of four 700,000-kilowatt hydropower generators from its parent company, China Three Gorges Project Corp (CTGPC).

He declined to forecast earnings for this year, but said positive factors like greater output of the four generators, which were bought in October last year, would strongly boost financial results in 2004.

"This year will surely see fairly strong increases in profits and earnings per share," Li told China Daily in an interview.

Yangtze Power raised 10 billion yuan (US$1.2 billion) in its initial public offering last November. Its shares surged by 44 percent on their trading debut later that month, as investors expected the company to offer stable returns as the power sector grows in tandem with China's rapid economic growth.

CTGPC plans to sell all of its 26 generators to the power-generating arm to finance a more colossal power project on the Jinshajiang River, but Li said Yangtze Power has no immediate plans to buy more.

Six of the 14 generators located on the left bank of the Three Gorges Dam went into operation last year. Four more will start running this year, with the other four following the year after.

The CTGPC signed contracts on Saturday to purchase the 12 generators for the right bank. The first four are expected to become operational in 2007.

Li excluded the possibility of any immediate plan to issue bonds to finance its purchases, citing a competitive 33 percent debt/asset ratio.

"In the future, we may resort to debt issues or other types of liabilities, or additional share offerings," he added.

CTGPC plans to build four hydropower stations on the Jinshajiang River, which flows into the Yangtze River in the upper reaches. Their installed capacity will be around twice that of the Three Gorges Project, the world's largest so far.

The preparatory work has started for the construction of the Xiluodu station, the first of the four, and the company has completed the feasibility report for Xiangjiaba, the second in line. The two's combined installation capacity - more than 18 million kilowatts - is close to that of the Three Gorges Project.

While investment for the first two stations is projected at a massive 73 billion yuan (US$8.8 billion) excluding price changes and interest payments, Li, who is also general manager of CTGPC, said the company has the financial strength to build them.

"We have never thought about using private or foreign capital," he said, dismissing some media reports that the firm plans to do so to help fund the construction of the Jinshajiang Project. "We have sufficient funds."

A huge part of the funds required will come from the company's own reserves and proceeds from selling generators, while the rest will come from loans, he said.

"Unlike many other power plants, we are not going to have a high debt burden (for the Jinshajiang project)," Li said, citing a some 50 percent debt/asset ratio.

"It's going to be a benign cycle," he said, adding that there will be new generators being put into operation every year through 2020.

CTGPC sold the four generators to Yangtze Power last year for more than 18 billion yuan (US$2.2 billion). The prices for future purchases will differ, and will require careful appraisals, Li said.

Li also pledged efforts to accelerate the installation of generators this year to help alleviate power demands when energy consumption peaks this summer. More than two-thirds of China suffered from power shortages during the past year, mainly a result of insufficient electricity transmission capacity.

This year's four generators will start working next month, in May, July and September.

Output in the first quarter of this year has been better than average, he said, boding well for meeting CTGPC's full-year output target of 50 billion kilowatt hours.

(China Daily March 29, 2004)