China Guangdong Nuclear Power Group, Fujian Coal Group and Datang International Power Generation Co. (Datang Power: 0991.HK) are co-investing in a nuclear power plant in Fujian Ningde. With a total expected installed capacity of 4000 MW and the first reactor to be put into operation before 2012, the project is believed to benefit the long term development of Datang Power.

Datang Power, however forsees that it will face problems like rising costs and dilutive effects, which will have a negative impact on earnings per share in the short-term when the project is carried out.

Datang power is expected to either issue additional shares or increase borrowing from banks to raise capital for the project but it is expected that its earnings will stil be dragged down for 2008 and 2009. Meanwhile, the unprecedented snow storm in February 2008 disrupted power and coal supplies, further reducing its power consumption hours and earnings for its 2008 fiscal year. Consequently, certain stock analysts have lowered their ratings on the stock from 'Overweight' to 'Neutral', and the price target has also been lowered to HKD 5.7.

Source: China Securities Journal

Date: 29 Feb 2008

CN01/SW/BT/GB