Huaneng Power International, Inc. (ADR) (HNP)

dferry01 (30.47) Submitted: 5/22/08 11:22 PM : Start Price: $32.10 HNP Score: 7.22

Yes, demand for energy is growing in China. Yes, Huaneng is the biggest, most stable player in the energy market. Yes, the company's board has good connections with the CCP's top brass. Yes, almost every CAP player disagrees with me and I'm probably a lower-case fool.
However-
The cost of coal has been squeezing HNP pretty badly, and so far the government refuses to allow them to raise rates. It is argued here that the company's government connections mean that they will eventually be allowed to raise rates, and I'm sure they will be. Whether they will be permitted to make all the profit a private company could is another question entirely. While rate restrictions in the face of increasing coal prices will be eased, there is no guarantee they will be lifted entirely. With the recent earthquake tragedy throwing focus back to the welfare of the Chinese people, I believe it to be most likely that HNP will be forced into serving the public good, instead of the bottom line.

As for my own bottom line: I don't believe in investing in companies that don't make their own decisions about their business. At the end of the day, this company is controlled by the Chinese government, and the interests of the CCP are not aligned with the interests of HNP shareholders.

Report this Post Replies: 1 | Reply