China Huaneng Group

中国华能集团公司

China Huaneng Group is China’s largest and only national state-owned power generating company with a total electricity output of 537.6 billion kWh from an installed capacity of 113 GW. Over the past 5 years, Huaneng has shifted its focus on renewable energy such as geothermal and to a lesser degree hydropower (approximately 10% of its new capacity) to minimize its exposure to the rising coal prices.

Shares of its subsidiary Huaneng Power International are traded on the Shanghai, Hong Kong and New York stock exchanges. A key driver for these Initial Public Offerings was the need to raise funds for energy infrastructure projects in China.

Huaneng does not have a good environmental track record.

Within China, Huaneng is a well-regarded company with a reputation for sound corporate management and continued growth. Technological innovation and environmental protection are reportedly central to its corporate culture. It has published annual sustainable development reports since 2006, however we have found the reports to generally lack substance and detailed policies.

In 2009, the Chinese Ministry of Environmental Protection (MEP) ordered that all work on Huaneng’s hydropower sites stop. The stop work order was made in response to the fact that Huaneng had started work on the Ludila Hydroelectric Project in the upper reaches of the Yangtze River without first securing environmental assessment approvals. The Chinese government Ministry of Environmental Protection’s (MEP) spokesperson Tao Detian, said that “building dams without proper designs and environmental protection measures would damage the water ecology, both upstream and downriver, as well as negatively impact local communities.” In a separate incident in 2009, the MEP also found that a Huaneng coal-fire power project located in Inner Mongolia had failed to meet a requirement in the environmental review process and worsened scarce local water supplies.

Huaneng has committed to building it self as an internationally competitive power company, but to date only has expressed interest in only few overseas hydropower projects. Its international strategy is to be a world-class power producer comparable with the world’s best power producers and has sought to achieve that by focused on increasing its generation capacity in China and internationally through asset accumulation, rather than development.

Huaneng’s dam building activities have been limited to Burma and pursued through it’s subsidiary, China Huaneng Lancang River Hydropower Company. Huaneng completed construction of the 600 MW Shweli I Hydroelectric Project in May 2009 following a 2.96 billion RMB investment by China. 85% of the power generated from Shweli I is exported to China.

Huaneng has set itself the goal of increasing its overseas installed power capacity to over 5% of its total capacity. However, there is no indication that Huaneng will expand its overseas dam building activities beyond Burma. Huaneng has been focused on the acquisition of overseas power companies with energy infrastructure, rather than developing energy infrastructure ovesreas. For example, in 2009 Huaneng purchased 100% of the shares of Tucas Power Ptd Ltd, a Singaporean company engaged in electric power production with 25% of the Singaporean market. The Group has also sought to acquire the Australian power assets of the international power generator InterGen in 2010.