Comments on the 2022 government work report of the public utility industry: it emphasizes the orderly transformation of the energy structure and does not mention the reduction of industrial and commercial electricity prices for the first time

Event:

On March 5, 2022, the fifth session of the 13th National People's Congress opened. Premier Li Keqiang delivered a government work report. The government work report proposes: to ensure the people's livelihood and the normal production and operation of enterprises; Strengthen the clean and efficient utilization of coal and orderly reduce and replace it; Promote the planning and construction of large-scale wind and solar power bases and their supporting regulatory power sources.

Key investment points:

Overall, the assessment of energy consumption intensity has become one of the main expected goals of China's development in 2022. From the perspective of the main expected objectives of China's development, compared with the assessment of energy consumption per unit of China's GDP in the government work report over the years (20202021, the same below), this government work report clearly puts forward that "the energy consumption intensity target will be comprehensively assessed within the 14th five year plan period with appropriate flexibility, New renewable energy and raw material energy will not be included in the total energy consumption control ".

In terms of energy and power supply, ensure the safe and stable supply of energy and power. Compared with the "implementation of the strategy for food, energy, resources and financial security" in 2021, this government work report emphasizes the protection of energy and power supply: "ensure people's livelihood and the normal production and operation of enterprises. Enhance China's resource production guarantee capacity, accelerate the exploration and development of oil, gas, minerals and other resources" and "ensure energy supply". At present, thermal power is still the main support for the safe and stable supply of power in China. In 2021, coal-fired power generation accounted for 60.0% of the total power generation. Since 2021, the sharp rise in coal prices caused by tight coal supply has restrained the willingness of coal power enterprises to generate electricity, and the power supply in many places is tight. In the context of frequent international geopolitical conflicts, ensuring China's resource production is conducive to enhancing the safe and stable supply of energy and electricity in China.

In terms of low-carbon energy transformation: emphasize the orderly reduction and substitution of thermal power and promote the construction of large scenic base

1) emphasize the orderly reduction and substitution of thermal power. Compared with "promoting clean and efficient utilization of coal and developing new energy" in previous government work reports, this government work report emphasizes "strengthening clean and efficient utilization of coal, orderly reduction and substitution, and promoting energy-saving and carbon reduction transformation, flexibility transformation and heating transformation of coal power", which further defines the pace of China's low-carbon energy transformation. For a long time, thermal power, as the ballast of China's power supply, determines that China's low-carbon energy transformation cannot be achieved overnight. On the premise of ensuring energy and power supply, based on resource endowment, we must promote the orderly reduction and substitution of thermal power and promote the construction of scenery.

2) promote the construction of large scenic base and supporting regulatory power supply, and improve the consumption capacity of power grid. The government work report proposed to "promote the planning and construction of large-scale wind and solar power bases and their supporting regulatory power sources, and improve the consumption capacity of the power grid for renewable energy power generation". According to the construction plans of the first and second batch of large scenic bases in China, the total installed capacity of large scenic bases in China will reach 297gw during the "14th five year plan" period and 552gw before 2030, which are 2.9 times and 1.9 times of the total installed capacity of new scenic bases at the end of 2021, respectively. In addition, the natural resource attributes of wind power and photovoltaic determine the volatility of their power generation. It is necessary to establish supporting regulatory power sources such as thermal power and energy storage facilities such as pumping and storage and electrochemistry to improve their utilization and consumption level.

In terms of electricity price, the reduction of industrial and commercial electricity price is not mentioned for the first time. Compared with the relevant statements of reducing the operating costs of enterprises by reducing industrial and commercial electricity prices over the years, the government work report proposed to "clean up the unreasonable price increase in power transfer links and support local governments to implement phased preferential policies for power consumption in industries with special difficulties". For the first time, it did not mention reducing industrial and commercial electricity prices, which reflected the Chinese government's determination to the market-oriented reform of electricity prices. Under the background that the price of electricity coal continues to be high, the current focus is to promote the market-oriented reform of electricity price, further dredge the cost transmission path of coal-fired electricity price and ensure power supply.

Investment suggestions: 1) this government work report proposes to ensure the safety of power supply, promote the orderly reduction and substitution of coal and electricity, and promote the construction of large scenic base, which further defines the pace of China's low-carbon transformation. In terms of electricity price, the reduction of industrial and commercial electricity price is not mentioned for the first time, which reflects China's determination to market-oriented reform of electricity price. Maintain the industry "recommended" rating. 2) In terms of individual stocks, it is recommended to recommend Huaneng Power International Inc(600011) , China Three Gorges Renewables (Group) Co.Ltd(600905) , Huadian Power International Corporation Limited(600027) , Shanghai Electric Power Co.Ltd(600021) , Fujian Funeng Co.Ltd(600483) , China Resources Power, Guangzhou Development Group Incorporated(600098) , Guangdong Electric Power Development Co.Ltd(000539) , Shenergy Company Limited(600642) ; Longyuan Power, Tianjin Guangyu Development Co.Ltd(000537) , Jilin Electric Power Co.Ltd(000875) , Nyocor Co.Ltd(600821) , China Yangtze Power Co.Ltd(600900) , Cecep Wind-Power Corporation(601016) , Cecep Solar Energy Co.Ltd(000591) , Zhongmin Energy Co.Ltd(600163) , CGN new energy; The target of nuclear power operation leader China National Nuclear Power Co.Ltd(601985) ; Distributed photovoltaic field Jinko Power Technology Co.Ltd(601778) , Zhejiang Chint Electrics Co.Ltd(601877) , Jiangsu Linyang Energy Co.Ltd(601222) , Ganghua gas, Skyworth Group, Zhejiang Sunoren Solar Technology Co.Ltd(603105) , Hangzhou Star Shuaier Electric Appliance Co.Ltd(002860) .

Risk tip: focus on the risk that the company's performance improvement is not as expected, the continuous rise of coal price, the decline of electricity price, the demand for electricity is not as expected, and the risk of policy change.

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