Event:
Doubling of budgetary expenditures of central government funds
On March 5, 2022, the Ministry of Finance requested the fifth session of the 13th National People’s Congress to review the report on the implementation of the central and local budgets in 2021 and the draft central and local budgets in 2022. Among them, the budget expenditure of the central government funds in 2022 was 807134 billion yuan, an increase of 98.8% and 101.6% respectively over the budget of 405997 billion yuan and the implementation of 400331 billion yuan in 2021.
Brief comment
Renewable energy surcharge is the most important item of the central government fund
Government funds are financial funds with special purposes collected free of charge from citizens, legal persons and other organizations in accordance with laws, administrative regulations and the documents of the CPC Central Committee and the State Council to support the construction of specific public infrastructure and the development of public utilities. There are usually about 20 central government funds included in the central budget, among which the renewable energy price surcharge, the central special treasury bond operation fund, railway construction fund, etc. with large amount of income and expenditure (see charts 1 and 2 for details). Taking the budget for 2021 as an example, the revenue from renewable energy accounts for 23.1% of the revenue budget of the central government fund, and the expenditure accounts for 21.9%.
Historically, the additional levy of renewable energy was insufficient
In November 2011, in order to promote the development and utilization of renewable energy and raise electricity price subsidies for renewable energy, the Ministry of finance, the national development and Reform Commission and the Energy Administration jointly formulated the Interim Measures for the administration of the collection and use of renewable energy development fund. After several adjustments, the current collection standard is 1.9 cents / kwh in the national non-agricultural and non residential electricity price except Tibet and Xinjiang. Taking 2020 as an example, the national deduction of power consumption of Tibet, Xinjiang, agriculture and residents is about 6 trillion kwh. According to the collection standard, 110 billion yuan should be collected, but the implementation amount of additional income from renewable energy electricity price in 2020 is only 89.239 billion yuan. According to the reply of the Ministry of finance, the main reason for the insufficient collection is that the additional electricity price is not strictly collected according to law, and the electricity for self owned power plants and local power grids is not collected or less collected for a long time.
The subsidy gap of renewable energy has become a chronic disease of the industry
The scope of renewable energy supplementary subsidies includes wind power generation, biomass power generation, Cecep Solar Energy Co.Ltd(000591) power generation, geothermal power generation and marine energy power generation. Through the calculation of wind power, photovoltaic, biomass and other electricity, we estimate that a subsidy of 190 billion yuan will be required in 2021. In that year, the supplementary budget expenditure of renewable energy price was only 89.1 billion yuan, with an annual gap of more than 100 billion yuan, This has led to a large number of subsidy arrears for new energy operating enterprises. We estimate that since 2016 alone, the gap between theoretical subsidies and actual distribution may have exceeded 400 billion yuan.
If the problem of subsidy arrears is solved, it will benefit the new energy power generation industry chain
The long-term existence of subsidy arrears has no impact on new energy power generation enterprises in two aspects:
1. Subsidy arrears lead to poor cash flow of new energy operating enterprises. In order to make up for this part of the operating gap, we have to supplement cash through debt, resulting in higher financial costs;
2. The lack of cash makes the enterprise unable to obtain the funds for expanding the scale. The high debt ratio limits the financing of the enterprise and greatly reduces the ability of the enterprise to install and expand.
If the problem of subsidy arrears is solved, it will first improve the profitability of new energy operating enterprises. According to the financial data of the third quarterly report of 2021, the operators with high proportion in the total market value are Shanghai Electric Power Co.Ltd(600021) , Cecep Solar Energy Co.Ltd(000591) , Jilin Electric Power Co.Ltd(000875) , Nyocor Co.Ltd(600821) , Jinko Power Technology Co.Ltd(601778) , etc. (see Figure 4 for details), These enterprises will benefit significantly.
Second, the central government’s determination to develop new energy will spur operators to expand their installed capacity faster, which will benefit the entire industry chain. Photovoltaic and wind power will usherin a long-term business cycle, and photovoltaic and wind power will usher in a long-term business cycle. The recommended targets are: 601 Longi Green Energy Technology Co.Ltd(601012) \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\, Sungrow Power Supply Co.Ltd(300274) , Jiangsu Goodwe Power Supply Technology Co.Ltd(688390) Arctech Solar Holding Co.Ltd(688408) etc.
Risk tips: 1. The subsidy payment time is less than expected; 2. The construction progress of new energy installation is less than expected.
