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•  Beijing is considering injecting capital into the country's massive but ailing power generation sector, executives at China's largest independent power producer said on Thursday."The government is weighing options on how to help the sector," said Liu Guoyue, president of state-controlled Huaneng Power International Inc ."They can inject capital or provide subsidy. But I think capital injection is the most likely, just like what they did to the airline industry before," Liu told reporters at the company's results briefing.

• The Chinese government handed out cash to its airline industry after the country's growth in air travel fell into single digits in 2008 for the first time in five years.Shares of Huaneng, which plunged about 8 percent on Wednesday when the company announced a much worse-than-expected fall in earnings for 2011, were up more than five percent on Thursday afternoon.Chinese power firms, such as Huaneng, Datang Power , Huadian Power and China Power International have been battered by a surge in coal prices in recent years and limited tariff increases.

• Thermal coal prices in China had risen 41.2 percent by the end of 2011 from the fourth quarter of 2009, while the government, worried about fuelling inflation and stoking public discontent, had only allowed a minimal rise in power tariffs.China's power sector, which is the world's second-largest after the United States, predominantly relies on coal for generation and cannot freely pass on fuel costs to end-users. More than 80 percent of Huaneng's 55,350 megawatts of generating capacity are fired by coal.

• Huaneng, which also owns generation assets in Singapore, posted on Wednesday a 65 percent drop in 2011 net profit despite a 22 percent increase in electricity output in China. It blamed the plunge in earnings on a nine percent jump in unit fuel costs and higher interest expenses.Its gearing ratio climbed 4.32 percentage points to 77.14 percent at the end of last year. Some analysts say a further deterioration in Chinese power firms' balance sheets could raise worries about their ability to finance debt.

• If the Chinese government chooses to inject capital into the sector, it will most likely pump it through state-owned parent companies of listed independent power producers, said Liu and Huaneng Chief Accountant Zhou Hui.Huaneng has seen improvement in its business in the first two months of this year, thanks to the government's efforts to cap coal price increases and the recent hike in power tariff, Zhou added.Huaneng aims for an 8 percent increase in its China power output this year, and its unit fuel cost growth should be capped at 4 percent, Liu said.     (Editing by Jacqueline Wong)

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