Chinese authorities have failed to observe the terms of their power purchasing agreements for two foreign-invested power projects in Fujian province, the Financial Times said. The Meizhou Wan and Houshi power generation projects are the latest of several such cases that have occurred over the past five years. Local government officials have told the plants to sell power at a steep discount because of considerable oversupply in the region. Fujian Province Power Corporation said it was offering to buy power from Meizhou at Yn0.44 per kWh, against an agreed Yn0.56 per kWh.
China needs foreign companies to invest in power projects if it is to fulfil its plan of increasing generating capacity from 319m to 390m kilowatts during the 10th five-year plan (2001-05). By failing to abide by its agreements, China risks alienating such companies, which already face the discouragement of a rate of return capped by the State Development Planning Commission at ‘slightly above’ the cost of capital.
In the meantime, Alstom and Electricit?de France have paid a US$30m fine for a delay in the construction of a power project in Guangxi autonomous region. The two French companies signed a contract in 1997 for a coal-fired plant in Laibin, in what was the Chinese power sector’s first build-operate- transfer project.
An EdF representative in Beijing said the fine had been paid and ascribed the delay to an engineering problem. However, the plant had been producing electricity for more than a year and selling it to a local power company at the agreed price. “We will not withdraw,” he said. “We can still earn a profit.”