BEIJING (Reuters) - China’s power generation companies will have to contend with massive closures of their smaller coal-fired power plants as government plans to shut excessive coal and steel capacity deprives the plants of customers, local media reported.

A man walks over a bridge as smoke rises from chimneys of a thermal power plant in Shanghai February 23, 2015. REUTERS/Carlos Barria/File Photo

China Guodian Corp [CNGUO.UL], one of the country’s top five state-owned power companies, might stumble as less-efficient “zombie” power plants are no longer economically viable, said Zhang Shumin, Guodian’s chief economist, on Saturday, as cited by Chinese financial publication Lengjing on their website.

“Thermal power plants will face difficulties in operating in the next three to five year, even edging to bankruptcy, especially for the small plants and those that fail to meet environmental standards,” said Zhang.

To relocate employees from the small thermal power plants, Guodian plans to increase wind power in its portfolio to transfer those workers to new positions, Zhang was cited as saying.

Guodian has 130 gigawatts (GW) of installed capacity as of 2015, with renewables accounting for 49 percent of the total. As the world biggest wind power supplier, it has 24 GW of wind power installed, or 18 percent of the nation’s total, said Zhang.

Profits have shrunk at China’s big power companies in the first half of the year as result of sagging power demand and rising coal prices.

Coal fires nearly three-quarters of Chinese power plants, but plants were operating at historically low utilization rates last year.

Thermal power plants under 600 megawatts would be phased out as they are not efficient, said Zhu Gongsha, director at renewables company GCL-Poly Energy 3800.HK, during the same seminar on Saturday, according to Lengjing.

China, the world’s largest power market, maintained strong investment in adding new power plants last year despite a slowing economy. Investment in coal-fired stations grew nearly 12 percent in 2015, according to the China Electricity Council.

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