Utilities Industry Weekly Report: Cost pressure is gradually released, and thermal power Q3 profitability is marginally improved-Research Report Text


2022-08-08: [Chinese Article Link]  This week, the SW public utility level has fallen by 3.40 per cent and ranked 22nd out of 31 SW level I plates; the 300 drops by 0.32 per cent, with a cumulative decrease of 0.81 per cent, a 0.02 per cent increase in Shenzhen and a 0.49 per cent increase in start-up panels. The breakdown shows a decline of 4.06 per cent in electric power, 0.36 per cent in hydropower, 5.61 per cent in photovoltaic power, 6.04 per cent in wind power, 6.12 per cent in integrated electricity services and 4.59 per cent in gas. The first five shares of the increase in utilities this week were: Tian Fu Energy (+8.42 per cent), Deep South Power A (+2.06 per cent), Kawashu Energy (+1.92 per cent), Naking Energy (+1.61 per cent) and Kanjing Power (+1.42 per cent); Nanjing Public Use (-18.84 per cent), Fugitive Energy (-16.97 per cent), New Sky Green Energy (-12.42 per cent), Jiangsu New Energy (-12.29 per cent) and Star Power (-11.93 per cent). Incident: On 5 August, according to the Directorate-General of Market Supervision, three investigation teams were organized by the Directorate-General of Market Supervision to conduct investigations in Shanxi, Inner Mongolia and Shaanxi, respectively, to further strengthen the regulation of the price of electricity and coal, to clarify the legal red line and to regulate the price order of electricity and coal; 18 coal enterprises were initially identified as being suspected of stoking the price of coal and three trading centres were suspected of not enforcing the Government's pricing. In view of the overall pace of implementation by the Association, the combined policy and regulatory efforts have demonstrated the commitment of the Association to the price of coal. In December 2021, the CDRC published the Work Programme for the Establishment of Performance of Medium- and Long-Term Coal Contracts in 2022 (Advised Draft), specifying the price mechanism for “base price plus floating prices” and adjusting the base price of the COCA in 2022 to 700 Yuan/tonne, applying monthly pricing, floating up and down within a reasonable area of 550-850 Yuan/tonne, and requiring 100 per cent of coal used by thermal power-generating enterprises in addition to imported coal; in February this year, the NCRC issued a circular on further improvement of the coal market price formation mechanism and a bulletin on clear price-lifting behaviour by operators in the coal sector, adjusting the base price of coal to 675Yan/tonne, with 570Yan/t-770Yan/t ton between reasonable zones; the policy began to be implemented on 1 May; credit commitments between the parties to the contract in June were completed; and since July, the NCRC has continuously issued a regulatory policy to regulate coal prices in order to combat the increase coal prices. On 5 August, according to information from the Directorate-General of Market Supervision, it was prima facie established that 18 coal companies in the latest investigation were suspected of having pushed coal prices and that three trading centres were suspected of failing to implement government pricing. With the endorsement of the policy, the regulatory authorities have continued to promote coal masters, and we believe that the pressure on fire power operators to operate at Q3 will be eased in the immediate realization phase. Coal at the end: Coal prices have gradually stabilized and coal prices have been significantly lower than their peaks in the year and the ring has been kept down. As at 5 August, the latest offers for power-driven coal in the island of Qin were 730 Yuan/tonne, 1135 Yuan/tonne, a decline of 0.7 per cent and 9.6 per cent, respectively; they were 3.9 per cent (760 Yuan/tonne on 9 February from the island of Qin 5,500) and 31.8 per cent (1664Yuan/tonne on 11 March from the island). With Q3 in place, the profitability of the coal-fired enterprises is expected to be repaired in the second half of the year. Depending on the year-on-year rise in the price of coal-fired purchases, the profitability of the coal-fired enterprises was stressed in the first half of the year. China Energy International: The combined price of the company's original coal purchases in the first half of 2022 was 840.27 Yuan/tonne, an increase of 41.20 per cent in the same year; the unit cost of fuel sold at the domestic fire power plant was 376.70 Yuan/MW, an increase of 50.49 per cent in the same year; the loss of performance in the first half of 2022, attributable to the net profit of the parent company's shareholders, was RMB-30.09 billion. China Electric International: The net profit attributable to shareholders in listed companies is expected to be between 1.49 billion yuan and 1.82 billion yuan in the first half of 2022, a 45 to 55 per cent decrease in the same year. Investment perspectives: In the first half of the year, China Power International, a traditional fire power company, was significantly reduced in profitability because of the high cost of coal. In the recent past, the Association’s coal policy has been advancing, and the price of powered coal has continued to fall. It is recommended that attention be paid to traditional power operators: China Energy International, China Power International, Yangtze River Power, Guilong Power, Enchant, National Electric Power, and New Energy Operators: Luang Power A, China Nuclear Power, China Energy-Save Wind Power, Dragon Power (H). Risk analysis: Systemic risks in equity markets; higher than expected downs in electricity prices on the Internet, higher than expected rises in coal prices, lower demand for electricity, less than expected water from hydropower and less than expected progress in industrial reforms.


Note: This is a machine translated version of the Chinese news media article. A mature and nuanced reading is suggested.




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Utilities Industry Weekly Report: Cost pressure is gradually released, and thermal power Q3 profitability is marginally improved-Research Report Text


2022-08-08: [Article Link]  This week, the SW public utility level has fallen by 3.40 per cent and ranked 22nd out of 31 SW level I plates; the 300 drops by 0.32 per cent, with a cumulative decrease of 0.81 per cent, a 0.02 per cent increase in Shenzhen and a 0.49 per cent increase in start-up panels. The breakdown shows a decline of 4.06 per cent in electric power, 0.36 per cent in hydropower, 5.61 per cent in photovoltaic power, 6.04 per cent in wind power, 6.12 per cent in integrated electricity services and 4.59 per cent in gas. The first five shares of the increase in utilities this week were: Tian Fu Energy (+8.42 per cent), Deep South Power A (+2.06 per cent), Kawashu Energy (+1.92 per cent), Naking Energy (+1.61 per cent) and Kanjing Power (+1.42 per cent); Nanjing Public Use (-18.84 per cent), Fugitive Energy (-16.97 per cent), New Sky Green Energy (-12.42 per cent), Jiangsu New Energy (-12.29 per cent) and Star Power (-11.93 per cent). Incident: On 5 August, according to the Directorate-General of Market Supervision, three investigation teams were organized by the Directorate-General of Market Supervision to conduct investigations in Shanxi, Inner Mongolia and Shaanxi, respectively, to further strengthen the regulation of the price of electricity and coal, to clarify the legal red line and to regulate the price order of electricity and coal; 18 coal enterprises were initially identified as being suspected of stoking the price of coal and three trading centres were suspected of not enforcing the Government's pricing. In view of the overall pace of implementation by the Association, the combined policy and regulatory efforts have demonstrated the commitment of the Association to the price of coal. In December 2021, the CDRC published the Work Programme for the Establishment of Performance of Medium- and Long-Term Coal Contracts in 2022 (Advised Draft), specifying the price mechanism for “base price plus floating prices” and adjusting the base price of the COCA in 2022 to 700 Yuan/tonne, applying monthly pricing, floating up and down within a reasonable area of 550-850 Yuan/tonne, and requiring 100 per cent of coal used by thermal power-generating enterprises in addition to imported coal; in February this year, the NCRC issued a circular on further improvement of the coal market price formation mechanism and a bulletin on clear price-lifting behaviour by operators in the coal sector, adjusting the base price of coal to 675Yan/tonne, with 570Yan/t-770Yan/t ton between reasonable zones; the policy began to be implemented on 1 May; credit commitments between the parties to the contract in June were completed; and since July, the NCRC has continuously issued a regulatory policy to regulate coal prices in order to combat the increase coal prices. On 5 August, according to information from the Directorate-General of Market Supervision, it was prima facie established that 18 coal companies in the latest investigation were suspected of having pushed coal prices and that three trading centres were suspected of failing to implement government pricing. With the endorsement of the policy, the regulatory authorities have continued to promote coal masters, and we believe that the pressure on fire power operators to operate at Q3 will be eased in the immediate realization phase. Coal at the end: Coal prices have gradually stabilized and coal prices have been significantly lower than their peaks in the year and the ring has been kept down. As at 5 August, the latest offers for power-driven coal in the island of Qin were 730 Yuan/tonne, 1135 Yuan/tonne, a decline of 0.7 per cent and 9.6 per cent, respectively; they were 3.9 per cent (760 Yuan/tonne on 9 February from the island of Qin 5,500) and 31.8 per cent (1664Yuan/tonne on 11 March from the island). With Q3 in place, the profitability of the coal-fired enterprises is expected to be repaired in the second half of the year. Depending on the year-on-year rise in the price of coal-fired purchases, the profitability of the coal-fired enterprises was stressed in the first half of the year. China Energy International: The combined price of the company's original coal purchases in the first half of 2022 was 840.27 Yuan/tonne, an increase of 41.20 per cent in the same year; the unit cost of fuel sold at the domestic fire power plant was 376.70 Yuan/MW, an increase of 50.49 per cent in the same year; the loss of performance in the first half of 2022, attributable to the net profit of the parent company's shareholders, was RMB-30.09 billion. China Electric International: The net profit attributable to shareholders in listed companies is expected to be between 1.49 billion yuan and 1.82 billion yuan in the first half of 2022, a 45 to 55 per cent decrease in the same year. Investment perspectives: In the first half of the year, China Power International, a traditional fire power company, was significantly reduced in profitability because of the high cost of coal. In the recent past, the Association’s coal policy has been advancing, and the price of powered coal has continued to fall. It is recommended that attention be paid to traditional power operators: China Energy International, China Power International, Yangtze River Power, Guilong Power, Enchant, National Electric Power, and New Energy Operators: Luang Power A, China Nuclear Power, China Energy-Save Wind Power, Dragon Power (H). Risk analysis: Systemic risks in equity markets; higher than expected downs in electricity prices on the Internet, higher than expected rises in coal prices, lower demand for electricity, less than expected water from hydropower and less than expected progress in industrial reforms.

Note: This is a translated version of the Chinese news media article. A mature and nuanced reading is suggested.

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