Fitch Ratings said Wednesday that the trend of declining margins and rising leverage of Chinese Independent Power Producers ("IPPs") is likely to continue in light of sustainable high fuel prices due to rising competitive demand and potential supply disruptions.

The financial performance of the sector would be adversely affected in the absence of commensurate tariff adjustments, particularly as China's increasingly stringent environmental laws on rising pollution could cause operating issues and further increase operating and capital expenditure.

"The IPPs would need to re-examine their capital structure and possibly add new equity as their financial profiles weaken owing to the rapid increase in leverage to fund organic growth and acquisitions," said Shang Ma, associate director in Fitch's Asia-Pacific Energy and Utilities team, in a special report titled "Chinese Independent Power Producers - Rising Leverage"

Fitch makes that observation in a study of the five Chinese IPPs listed in Hong Kong, namely China Power International Development Limited ("CPI"), China Resources Power Holdings Company Limited ("CRP"), Datang International Power Generation Company Ltd ("DTP"), Huadian Power International Corporation Limited ("HDP") and Huaneng Power International, Inc.

By People's Daily Online