Huaneng Power's net profit down 37.6% to US$272m

No thanks to lower generation in China amidst oversupply.

Huaneng Power's net profit was -37.6% yoy to Rmb8,520m in 2016, 4% below consensus, according to Citi.

Stripping out one-off items namely impairment loss (-61% yoy to Rmb1,208m in 2016) and forex loss (+9.3x yoy to Rmb250m from 4.3% Rmb/SGD depreciation), its recurrent net profit was -40% yoy to Rmb9,979m in 2016 due to three reasons.

PRC net generation was -2.1% yoy to 313.7M MWh amidst oversupply, average PRC tariff was -10.5% yoy to Rmb396.6/MWh for lowered benchmark tariff and more competitive bidding sales; and net loss of Tuas Power exacerbated 3.1x yoy to Rmb240m, with Rmb204m income tax credit in 2015 vs. nil in 2016.

Final DPS was -38% yoy to Rmb0.29, at 52% payout (+1.9ppts yoy).

Here's more from Citi:

Huaneng made a net loss of Rmb574m in 4Q16 in PRC GAAP. Stripping-out one-off impairment losses -64% yoy to Rmb1,058m, its recurrent net profit in 4Q16 was -86% yoy to Rmb483m for unit fuel cost +29.9% yoy to Rmb220/MWh from calculation and lower coal-fired tariff, only partly offset by gross generation +2.0% yoy to 81.1M MWh in 4Q16.

Huaneng's unit fuel cost (incl. coal & NG) was -1.76% yoy to Rmb170.62/MWh in 2016, including +29.9% yoy to Rmb220/MWh in 4Q16 in our calculation.

Its natural coal cost was +2.73% yoy to Rmb376.3/tonne in 2016. Its gross generation in China was -2.1% yoy to 313.7M MWh in 2016. Average utilization in 2016 was -5.4% yoy to 3,921 hours for all plants and -2.4% yoy to 4,107 hours for coal-fired.

Average on-grid tariff of its domestic power plants was -10.5% yoy to Rmb396.6/MWh in 2016. Huaneng targets gross generation +25% yoy to 392M MWh in 2017E factoring in parental asset injection and utilization -3.1% yoy to 3,800 hours for its PRC plants.

Capex budgeted is Rmb22.7bn in 2017E, +11.9% yoy from Rmb20.285bn in 2016, including 45% for wind, 26% for coal-fired greenfield projects, 23% for technical upgrade and 6% for solar in 2017.