Chinalco bought its most recent share in Ningxia Electric Power Group from the Huadian Power International Corporation for RMB1.36 billion, despite incurring losses of RMB4.34 billion during the first three quarters of 2012. Its losses were attributed to increased energy prices and power tariffs, the latter accounting for 40% of the cost of aluminium production.
Chinalco's decision to buy in to the power company is widely viewed as a cost-cutting exercise as the on-grid power tariff in Ningxia is RMB0.29 per kWh compared to a national average of RMB0.6.
Ningxia Power boasts 2.68 billion tonnes of coal reserves, a 16Mt/yr production capacity and an installed thermal power capacity of 3,874MW. It also has 1,039MW of windpower generating capacity and 103MW of photovoltaic generating power.
Chinalco, which plans to invest a further RMB2 billion in Ningxia, is not alone. Other companies are seeking to cut costs through buying into power companies or installing their own captive power stations.
Zhongfu Industrial is acquiring a 41.05% stake in Zhongfu Power from Yulian Energy Group; Tianshan Aluminium has signed contracts with Tianfu Thermoelectricity and the Shenhuo Group in Henan has invested RMB2 billion in a 600MW coal-fired power station supplying electricity at RMB0.437 per kilowatt-hour.
Source: China Metals.