Huaneng Power Faces Margin Squeeze as Tariffs Slide and Fuel Costs Rebound
Q2 coal-fired profitability plunges while the utility pushes ahead with renewable expansion and storage.
600011.SS · Earnings Call · 2026-08-19
Margin Squeeze
Huaneng Power International reported a sobering set of interim results on August 19. Net profit attributable to shareholders fell 28.9% year-on-year to RMB 6.59 billion in H1 2026, as “the net profit attributable to the company's shareholders scaled RMB 6.59 billion, decreasing by 28.89% yearly” — Guoyue Liu, Executive Director and President · 2026-08-19. The decline is concentrated in the second quarter, where coal-fired profitability collapsed.Tariffs Slipping, Fuel Costs Climbing
The core issue is a double whammy: electricity tariffs are falling across the board, while fuel costs are rising. The company's average coal-fired tariff fell 5.56% year-on-year to RMB 445.26 per MWh. Management detailed: “In the first half of the year of 2026, we have realized coal-fired unit on grid power tariff of RMB 445.26 per megawatt hour, which has shown a year-on-year decrease of RMB 26.21 per megawatt hour, equivalent to 5.56%” — Guoyue Liu, Executive Director and President · 2026-08-19. Wind, PV, and biomass tariffs all declined too; only gas-fired tariff rose. On the cost side, unit fuel costs spiked in Q2. The average unit fuel cost rose 14.56% quarter-on-quarter to RMB 281.03 per MWh, as spot market coal prices jumped and long term contract delivery rates fell. Management cited geopolitical tensions and domestic security inspections. “In the second quarter alone, we have an average unit fuel cost of RMB 281.03 per megawatt hour, which has saw a quarter-on-quarter increase of RMB 35.7 per megawatt hour equivalent to 14.56%” — Guoyue Liu, Executive Director and President · 2026-08-19. The standard coal price for Q2 was RMB 907.20 per ton, up 3.77% QoQ.Overseas and Renewables: Not Enough
Huaneng's overseas and renewable segments provided some diversification, but not enough to offset the thermal decline. Tuas Power in Singapore saw EBIT drop due to expiring high-margin contracts and a higher carbon tax. The company is ramping up electricity storage to adapt to new market rules, and added 2.55 GW of renewable capacity in H1. However, PV net profit fell 35.84% YoY as tariffs kept declining.Coal Supply Outlook
Management expressed caution on coal supply for H2, noting suppliers are reluctant to fulfill long-term contracts:Despite the pressure, Huaneng raised its dividend 50% to RMB 0.4 per share, signaling confidence in its balance sheet. But the current margin squeeze is real, and the market will be watching whether Q3 fuel costs ease.On the demand side, the domestic output was constrained as the company -- as the country is delivering a security inspection. And on the spot market, the price is comparatively higher recently. The suppliers of the long-term contract coals are not willing to fulfill their contract as well.