Chinese IPPs’ fundamentals should recover strongly in 2009, mainly on the back of lower coal prices. Although demand growth will decline in 2009, falling prices for coal (70% of operating costs), will offset much of the effect
on operating profits.

Mainland power producers have been at the mercy of increasing coal prices, but now the tables have turned in their favor as spot coal prices have dropped 48% from their August highs and are currently 5% below levels from a year
ago. IPPs that are currently in negotiations with coal suppliers will be able to push for smaller price increases in 2009 (5% vs. the historical 10% p.a. hike).

……^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^