Split of China power assets delayed to yearend

BEIJING, Aug 27 (Reuters) China will likely finish separating power generation from transmission assets by the end of this year, the industry regulator said today, progressing more slowly than previously planned due to ownership and financial disputes.

Eighty per cent of the work is finished to reallocate generating assets among China's five power generating groups and two grid firms, said the State Electricity Regulatory Commission (SERC).

The rest of the 8 gigawatts (GW) of generating assets is expected to be completed by yearend. The cases have to be dealt with individually due to their complicated ownership and because of financial disputes, SERC said in an announcement on its Web site (www.serg.gov.cn).

An SERC official told Reuters earlier that the separation was previously scheduled to be completed by the end of August.

Until relatively recently, China had only one power operator controlling everything, from generation to transmission. The monopoly was broken up in 2002 with the distribution of power assets between two grid firms and five major generating groups.

But Beijing left two sets of generating assets under the control of the grid operators, sparking complaints of unfair competition from other firms worried that electricity from the grid-controlled stations had preferential access to the network.

The government sold the first batch, of 10.8 GW, in May this year to 31 firms for a total of 18.7 billion yuan (2.47 billion dollars), and plans to sell the second set by this month.

The move is one of the key steps towards Chinas long-term goal of a liberalised electricity market. A pilot reform to separate power transmission and sales to end users is expected to kick off sometime after the asset sell-off.

Reforms in the sector stalled in 2004 as China struggled to cope with widespread power shortages of up to 40 gigawatts at peak times.

The deficits have eased since then, although shortfalls still exist in some regions this summer.

REUTERS RN BD1241