China Hongqiao Group’s share price drops on the news of fees for captive power plants

According to a Reuter’s report, shares of China Hongqiao Group, the world’s biggest aluminium producer, dropped for a second day on Monday, 17 September 2018.

The drop came after its home province of Shandong announced introduction of fees for captive power plants. The Shandong commodity price bureau said owners of captive power plants would need to pay 0.05 yuan (US$0.0073) kWh of electricity generated from July 2018, rising to 0.1016 yuan kWh after 2019.

Analysts estimate that the new policy would increase Hongqiao’s aluminium production costs by around 500 yuan ($73) per tonne. Hongqiao said on Monday that it has “not received any specific notice at this time.” The company said it would talk with relevant government authorities “to provide reasonable suggestions with a view to securing maximum interest of shareholders of the company.”

It was the decision of the National Development and Reform Commission to enforce factories with captive power plants to pay fees to compensate for $12 billion in cuts to commercial and industrial electricity prices.

The stock fell as much as 8.5 per cent on Monday to HK$5.30 ($0.675) after a near 16 per cent plunge on Friday, touching a two-year low.