(Yicai) Sept. 4 -- Profits of major listed Chinese thermal power companies increased in the first half thanks to falling coal prices, despite declines in on-grid electricity volume and prices.

The cumulative first-half net profit of Huaneng Power International, Datang International Power Generation, Huadian Power International, Guodian Power Development, and China Power International Development, the listed power generation subsidiaries of China's five major energy groups, neared CNY24.7 billion (USD3.5 billion), the highest since 2016.

Except for China Power International, the four others achieved double-digit net profit growth in the period, with Datang International Power recording the highest growth of over 47 percent.

Moreover, other listed companies with large thermal power assets, including Datang Huayin Electric Power, Henan Yuneng Holdings, Jointo Energy Investment, Jinneng Holdings Shanxi Electric Power, and Beijing Jingneng Power, posted even better performances in the first half, with their net profits all more than doubling from a year earlier.

The decline in coal prices has played a key role in cost control and profit improvement at thermal power companies. The benchmark average closing price of 5,500-kilocalory coal at Caofeidian Port was CNY618 (USD86.50) per ton in the second quarter, down over 20 percent from the same period last year, according to data from the China Electric Coal Purchase Price Index.

As a result, thermal power firms' power generation costs significantly dropped. The unit price of standard coal input at Huadian Power International was CNY850.74 per ton in the first half, down 13 percent from a year earlier, with that of Guodian Power and Huaneng Power International falling 9.5 percent and 9.2 percent, respectively.

The decline in coal prices was large enough to offset the falling volume and prices of electricity thermal power companies fed into the power grid system. For example, Huadian Power International's on-grid electricity volume dropped 6.5 percent in the first half from a year earlier, with the average on-grid electricity price down 1.4 percent to CNY517 per megawatt-hour.

The decline in on-grid electricity volume and prices will be two big challenges for power generation enterprises with large thermal power assets for a relatively long period, Lin Boqiang, dean of the China Institute for Studies in Energy Policy at Xiamen University, told Yicai.

As new energy power consumption increases year by year, the role of thermal power as a base-load power source is weakening, and the related annualized utilization hours are declining, Lin noted, adding that the downward trend in on-grid electricity volume of thermal power firms may be unavoidable.

Coal-fired power companies need to better adapt to dynamic changes in market demand by reducing their electricity supply to the power grid when electricity prices are low and increasing it when prices rise to tackle the declining average on-grid energy price, Lin said.

To achieve this goal, coal-fired power enterprises should carry out flexible transformation of the power generation capacity of their existing generator sets and add new energy storage facilities, such as electrochemical energy storage and molten salt heat storage facilities, to improve their power supply regulation capability, Lin pointed out.

Editors: Tang Shihua, Futura Costaglione