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Tue, Jun 15, 2004 - Page 12 News List

GE, Bayer get priority for power

ELECTRICITY SHORTAGE Shanghai says foreign manufacturers will be given priority in the event of brownouts this summer

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General Electric Co, Bayer AG and other multinational companies operating in Shanghai are being given top priority by city officials when it comes to their power supplies as the peak summer demand period threatens shortages.

"This summer our priority targets for electricity are the foreign-invested enterprises," Shanghai Vice Mayor Zhou Yupeng told a briefing attended by heads of eight multinationals such as General Electric, the world's biggest company by market value, Bayer, Germany's second-biggest drugmaker, and France's Alcatel SA, the world's No. 2 maker of telecommunications equipment.

Shanghai's power demand may rise as much as 15 percent from a year ago during this year's peak period, from tomorrow to Sept. 17, the city government's Web site said. Shanghai had its hottest summer in 60 years in 2003, causing power shortages as air conditioners were turned on in shops, factories and homes.

The city wants to avoid a repeat of last year's blackouts, which affected an industrial park where General Motors Corp makes cars and NEC Corp produces computer chips. At stake is investment by 34,000 foreign companies that reached US$50 billion in the city by last month and accounted for more than 60 percent of its US$48.5 billion of exports last year.

"Power supply to foreign companies, especially those in the preferred industries, will be guaranteed," Yu Beihua, deputy director of Shanghai Development and Reform Committee, said at the meeting last Thursday. He didn't state which are the preferred industries.

The power shortage issue still weighs on the minds of many investors. The China unit of Marubeni Corp, Japan's fifth-largest trading company by revenue, said it suffered losses caused by blackouts last summer that halted production.

"We are very worried about a power shortage as it is very dangerous as a sudden stoppage could cause explosions," said Tadao Manabe, president of Marubeni China. "Last year we had to stop work two to three times a week, with only a few minutes warning each time. Sometimes we didn't even get a warning."

Elmer Stachels, Bayer's chief executive officer for China, said the company is considering building its own generators.

Bayer, which last year generated 1.1 billion euros (US$1.3 billion) in revenue in China, plans to invest US$3.1 billion to build an integrated production site in an industrial park at Caojing, near Shanghai.

"For big projects you need to have your own generators as a safety net," Stachels said.

China faces a power shortage of 60 million megawatt-hours this year, the State Electricity Regulatory Commission said. In the first four months of this year, consumption rose 16.1 percent to 650.5 million megawatt-hours, while production rose 15.8 percent to 647.3 million megawatt-hours, the commission said.

During summer, demand for electricity surges as homes and offices switch on their air conditioners. For every 100 Shanghai households, there are 130 units of air conditioners. Air conditioners used about 6,500 megawatts, of which 2,000 megawatts was by residential consumers.

In April, the city government said it planned to invest more than 100 billion yuan (US$12 billion) by 2010 to double electricity generating capacity. The city plans to buy more than 3,800 megawatts of power from neighboring provinces this year, an increase of more than half from a year earlier.

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