A trainer stands next to a sign in a worker's training room at Daya Bay Nuclear Power Plant. Dongfang Electric said new orders for nuclear power equipment may see a drop this year due to worries triggered by Japan's earthquake and subsequent nuclear crisis. Scott Eells / Bloomberg

2010 full-year net profit up 58.1%; but nuclear power orders to take a hit this year

Dongfang Electric Company Ltd, one of China's major power equipment makers, expects that stronger demand for its hydro and coal fired power equipment in 2011 will help offset the drop in new orders for its nuclear power equipment due to Japan's crisis, the company said Wednesday after posting a 58.1 percent gain in its full-year net profit.

The company recorded a net profit of 2.7 billion yuan for the year ended December 31, up 58.1 percent from the previous year, as its revenue rose 14.73 percent to 37.6 billion yuan from 2009 on new orders and improved margins.

The board proposed a final dividend of 0.13 yuan per share for 2010, compared with 0.16 yuan per share in 2009.

For 2011, the company expects installed power equipments to generate 38,000 megawatts (mW) of electricity, up from 34,511 mW recorded for 2010.

The past year saw the company bag approximately 50 billion yuan worth of new orders, of which coal-fired power business accounted for 55 percent, followed by its wind power business at 20 percent and nuclear power business at 18 percent.

For 2011, total new order value will likely remain at the 2010 level, the company's Chairman Si Zefu said, but new orders for nuclear power equipment may see a drop due to worries triggered by Japan's earthquake and subsequent nuclear crisis.

The pace at which the central government gives the go-ahead to nuclear power projects will "slow down", Si said at a media briefing Wednesday.

As a result, "some (nuclear power) projects will have their tender postponed", which will lead to fewer nuclear orders in 2011 compared with 2010, Si noted.

But the impact from falling nuclear orders to the company will be "slight", according to Si. The drop, he explained, will be balanced out by a rise in new orders for the company's hydro and coal-fired power equipment.

And the chairman remains bullish on the long-term outlook for the development of nuclear power, which he said is better-positioned than hydro power and wind power to meet the burgeoning demand for electricity. Nuclear power, he noted, is more sustainable and not subject to seasonality as its alternatives are.

As of end-2010, Dongfang Electric had accumulated orders worth more than 140 billion yuan, including 40 billion yuan worth of nuclear orders.

As the largest nuclear power equipment maker in China, Dongfang Electric makes up 40-45 percent of the domestic market. In respect of coal-fired power equipment, the company has a market share of around 30 percent and also accounts for 40 percent of the hydro power equipment market in China.

However, investors seem not to be so bullish on the outlook for the company's nuclear business. The week following Japan's earthquake on March 11 saw Dongfang Electric's shares plunge around 20 percent.

Patrick Yiu, associate director of asset management at CASH Asset Management Ltd, said the company's shares will likely trend down going forward. "Investors are concerned that the central government will take a tougher stance ahead toward nuclear power development," said Yiu.

Mathew Kwok, China division vice-president at Taifook Securities Ltd, shared this view, saying that the days ahead will see Dongfang Electric's shares hover around their currently low price. "There are still a lot of uncertainties," said Kwok. Until Japan's nuclear crisis, investors were encouraged by the company's nuclear order growth and the continued expansion in the profit margin for its nuclear power business, Kwok noted.

Dongfang Electric's shares closed trading Wednesday in Hong Kong at HK$27.7, up 2.78 percent.

China Daily

(HK Edition 04/07/2011 page2)