Things are finally looking up for China's IPP's. If reports are true, Chinas big five IPP's have finally signed coal contracts with coal producers in Shandong and Guizhou. But what exactly does this deal signify?rnThe contract price in Shandong is 4% higher than the prices originally set in the 2008 supply contracts while the price is unchanged in Guizhou. Contract price talks in Henan are said to be close to finalisation and the price increase is reportedly minimal. With the signing of these coal supply agreements, negotiations in other major coal-producing provinces, such as Shanxi and Inner Mongolia, may end soon.rnTalks between the IPP's and coal producers have been long-drawn, lasting for six months to date. That's all well and good for all parties but for Huadian Power International - one of the largest IPP's in the peoples republic - FY09 EPS could be lowered by as much as 14%. This is due to Huadian has significant exposure to Shandong as 54% of its attributable capacity is located there. Keith Li, an analyst from CIMB-GK, estimates that if its 2009 contract price is increased by an average 4% instead of our forecast of no increase, its 2009 net profit could be cut by 14%.
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