Dams and Earthquakes

China quake batters energy industry

May 22, 2008

Deputy Industry Minister Xi Guohua said early this week that companies had suffered $9.5 billion in damage from the earthquake, reports Business Week.

Business Week’s Dexter Roberts writes:

Initially economists were hopeful that the disaster would at least not have a major impact on China’s economic growth [PDF] since Sichuan province, site of the temblor, is largely agricultural. However, as the extent of the quake’s destruction becomes more apparent, some are starting to worry about damage inflicted on the economy.

Hardest hit by has been Dongfang Electrical Corp., whose Mianzhu (Sichuan)-based subsidiary Dongfang Turbine, China’s largest turbine producer, was virtually wiped out. In a statement released on May 16, the company said Dongfang Turbine has “suffered severe damage” from the quake, causing “a serious impact on the manufacturing and selling of turbines.” One-fifth of total revenues of more than $24 billion last year came from the turbine business. Dongfang, which produces 30% of China’s locally made turbines, estimates direct losses from the earthquake will reach $1 billion.

Investors have fled: Dongfang’s Hong Kong-listed stock has dropped 17% since the earthquake and its Shanghai-listed shares plunged 10% (the daily limit) on Monday, the first day of trading after a four-day suspension.

The hydropower sector is likely to suffer the longest-lasting damage. China depends on hydropower to provide more than 20% of the country’s total installed energy capacity of 722 gigawatts, with national goals to more than double that by 2020. (China has more than half of the world’s 40,000 large dams defined as being more than 15 meters high.) On May 14, the Water Resources Ministry announced that 391 dams were believed badly damaged.

“There are major safety issues right now with the reservoirs, hydropower stations, and lakes in the earthquake zone,” Minister Chen Lei said in a statement released on the ministry’s Web site. “The area has numerous reservoirs and lots of damage, and the extent of the danger is unknown.”

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