China Datang Eyes Africa as Domestic Power Use Wanes

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Originally published in Bloomberg

China Datang Corp., the Chinese power producer with investments in Laos, Cambodia and Kazakhstan, plans to explore the African market as the global financial crisis slows domestic demand for electricity.

China’s second-biggest power producer signed an accord with the China-Africa Development Fund, initiated by President Hu Jintao in 2006, to help develop “electricity and relevant industries” on the continent, China Datang said in a statement on its Web site today. The parent of Hong Kong-listed Datang International Power Generation Co. gave no details.

The global recession has slashed demand for Chinese exports, resulting in a drop in domestic electricity use and prompting generators such as China Datang to look overseas for expansion. Africa needs to attract investments of $300 billion over the next 20 years to build the energy infrastructure required to sustain the continent’s economic growth.

The $5 billion China-Africa fund backed by the government in Beijing was created to help Chinese companies invest in Africa. Shenzhen Energy Investment Co., partly owned by Huaneng Power International Inc., and the fund may build a 1.03 billion-yuan ($151 million) gas-fired plant in Ghana. Sinohydro Corp. won a contract this year to construct a hydropower plant in Kenya.

Power Demand

China may face a surplus of electricity within the next two years as demand falls and more capacity comes online, Wang Siqiang, a deputy director at the National Energy Administration, said last month.

The country’s power consumption rose 5.2 percent last year, down from growth of 14.8 percent in 2007, the Beijing-based China Electricity Council, which represents the nation’s power producers, said on Jan. 5.

Chinese exports fell for the first time in seven years in November while imports plunged and manufacturing contracted by a record as the global recession pushed the world’s fourth-biggest economy into a slump. Investment in domestic power plants fell 11 percent to 288 billion yuan last year, the electricity council said at the time.

Africa needs to add about 13,000 megawatts of generation capacity annually until 2030, which is a rate three times quicker than the 10 years since 1998, Vinod Shrivastava, president of energy consulting firm Core International, said in November.

South Africa, suffering a power crisis that’s limiting supplies to gold and platinum mines, canceled a plan to build a nuclear plant for about 120 billion rand ($12 billion) as the global credit freeze cut financing, Fani Zulu, a spokesman for state-run power utility Eskom Holdings Ltd. said on Dec. 5.

The continent’s economy expanded more than 5 percent a year for four straight years, and growth in 2008 may accelerate to 5.9 percent, the Organization for Economic Cooperation and Development and the African Development Bank said on May 11.

To contact the reporter on this story: Wang Ying in Beijing at