Formosa Group may sell its China power plant stake

Formosa Group chairman Wang Yung-ching (王永慶) said he may sell the group's stake in Zhangzhou power plant in China's Fujian Province after admitting the investment was a mistake, Chinese language media reported yesterday.

The reports said a power plant built in China by the Formosa Plastics Group's (台塑) US division is facing severe losses amid an oversupply of electricity in the local market, citing mainland media reports.

The US$3.2-billion Houshi Plant (后石電廠) located in Zhangzhou, hasn't made a profit since its first generator came on stream in May last year, because of falling electricity prices amid oversupply in the province, the reports said.

Wang, who invests in China for Formosa through his personal holding companies, is considering selling the stake in the plant if the business becomes profitable, local media said.

Taiwan's biggest industrial company has seen profits plunge as Taiwan's economy contracted 2.35 percent in the second quarter. The nation's GDP will probably shrink for the full year for the first time since records began half a century ago. The Chung-hwa Institute for Economic Research forecast GDP to contract by 1.76 percent this year.

Net profit at Formosa Plastics, the group's flagship, fell 48 percent in the third quarter. Its sister company, Nan Ya Plastic Corp (南亞塑膠), said earnings declined more than two-thirds in the three-month period.

While Wang said the losses incurring with the Zhangzhou power plant will not impact on Formosa Group's other China-bound investment, the group is facing a harsh business time, especially after local media reported last week that Formosa Plastics has planned to cut salaries by about a fifth from next year.

The pay cuts, the first since the group was founded 43 years ago, will save Formosa Group almost NT$5 billion (US$145 million) next year, local media reported.