Datang Power (601991.SH) has accumulated long-term borrowings of 114.4 billion yuan as of the first quarter of 2026, a figure that has remained above 100 billion yuan consistently from 2021 to 2025.

To put this into perspective, the company's total revenue for the full year of 2025 was 121.3 billion yuan, meaning its borrowings are nearly equivalent to a full year's income. Across the entire listed company landscape, only 17 firms had long-term borrowings exceeding 100 billion yuan between 2021 and 2025, and among power companies, just 9 reported long-term borrowings of 114 billion yuan in the first quarter of 2026.

So, where does Datang Power's massive 100 billion yuan in long-term debt come from, and what has it been transformed into?

Two Key Drivers Behind High Borrowings

Generally, persistently high long-term borrowings stem from two main reasons. The first is substantial ongoing construction projects, such as factories and production lines, which require long-term debt to match long-term assets. The second is an active decision to increase leverage to optimize the financial structure, where borrowed funds generate returns higher than the interest costs.

Datang Power fits both categories. The company is a core listed entity under China Datang Corporation and one of the country's largest independent power generators. As of the first half of 2026, it and its subsidiaries had completed on-grid electricity of approximately 129.469 billion kilowatt-hours, with thermal coal-fired power accounting for 68.57% of that total. Hydropower, wind, and solar clean energy sources contributed about 30%.

The electricity-selling business is notably capital-intensive. By the end of 2025, Datang Power's total assets stood at 333.5 billion yuan, with fixed assets of 219.3 billion yuan and construction in progress of 21.6 billion yuan, together making up 72.23% of total assets. As of the first quarter of 2026, construction in progress rose to 23 billion yuan, an increase of 1.4 billion yuan from the end of 2025. This indicates that most of the company's earnings are tied up in illiquid fixed assets like power stations and units, which require massive investments that cannot be supported solely by internal funds.

While matching long-term debt with long-term assets is a passive choice driven by industry characteristics, actively increasing leverage is a strategic financial decision. In 2025, Datang Power's comprehensive financing cost dropped to 2.33%, the lowest since 2021, while its return on invested capital (ROIC) was 4.76%. This means for every 100 yuan borrowed, the company pays 2.33 yuan in interest but earns 4.76 yuan from its power plants, netting a profit of 2.43 yuan. Thus, borrowing to build power plants is a relatively profitable venture for the company.

However, "cheap borrowing" does not equate to "borrowing as much as possible." Debt is a double-edged sword. When the interest spread (income minus expense) is positive, it amplifies profits, but a change in the operating environment can turn it into a risk amplifier. Datang Power's average debt-to-asset ratio from 2021 to 2025 was 72.25%, which, while high for the power industry, is notably above peers like Huaneng Power International and Huadian Power International.

A Strategic Shift Through Private Placement

In early July, Datang Power announced a plan to raise up to 8 billion yuan through a private placement to fund expansions of four large-scale coal-fired power plants in Fuzhou, Lüsigang, Chaozhou, and Toumen Port. This is not borrowing but exchanging equity for cash, which does not require repayment of principal and interest, directly boosting net assets and helping lower the debt-to-asset ratio.

Interestingly, all 8 billion yuan from the private placement is earmarked for coal-fired power plants, which seems contrary to the prevailing trend toward green energy. The reasoning is that while renewable energy sources like solar and wind are expanding, they have limitations in providing 24/7 stable power, especially for critical applications like data centers. Thermal power, with its large capacity, stability, and adjustable output, acts as a backup. For example, at the Ulanqab site in Inner Mongolia, the cost of thermal power is about 0.26 yuan per kilowatt-hour, and even when combined with green energy costs, the total is still around 0.27 yuan per kilowatt-hour, which is lower than storage costs.

Thus, Datang Power is positioning itself not just as a traditional power generator but as a reserve power source for computing needs, earning "backup value." The four new coal-fired plants in the private placement are all ultra-supercritical units, which are more efficient, use less coal, and are more environmentally friendly, aligning with the trend of low-carbon consumption.

The Coal Price Variable

Nevertheless, Datang Power's profit growth is heavily influenced by coal prices. About 60% of its costs come from fuel, primarily coal. In 2025, power fuel costs fell by 9.563 billion yuan, dropping to 54.04% of total costs, as coal prices remained low. The average price of Qinhuangdao 5500 kcal thermal coal was about 703 yuan per ton in 2025, down 18.4% year-on-year. This helped Datang Power achieve a net profit increase of 63.91% in 2025, reaching 7.386 billion yuan, and in the first quarter of 2026, net profit continued to grow at a high rate of 29.26%.

The gross margin further illustrates the impact of coal prices. In the first quarter of 2026, Datang Power's gross margin rose to 19.66%, up 2.88 percentage points, and its net margin increased to 11.38%, up 2.29 percentage points. However, coal prices are unlikely to stay at these low levels. In July 2026, thermal coal prices showed signs of recovery, with the average price of Qinhuangdao Q5500 thermal coal rising to 821 yuan per ton, a 29 yuan increase per ton, which could affect Datang Power's net profit.

Conclusion

In summary, the 110 billion yuan in borrowings reflects a tug-of-war between business expansion and debt leverage for Datang Power. The company now stands at a crossroads of opportunity and risk. The opportunity lies in computing power redefining the value of thermal power, with the 8 billion yuan private placement directed at advanced coal-fired plants to prepare for this trend. The risks include the impact of coal price volatility, electricity prices, and financing costs on profits.