Renewable Energy Fund: stimulate the development of new energy in the form of subsidies. The renewable energy fund was established in 2011, mainly to promote the development of wind power, photovoltaic and other renewable energy industries. Its revenue and expenditure is mainly dominated by the central government. From the perspective of composition, the renewable energy subsidy fund is mainly composed of the additional income of renewable energy electricity price (the main source of income is collected from power users other than agriculture) and the special national financial fund (public budget); From the user side, the subsidy for renewable energy power generation (the part of the subsidized renewable energy on grid price higher than the benchmark coal price) accounts for 78.1% of the total subsidy for renewable energy (2011 data).
The amount of subsidies continues to expand and is expected to be cleared in 2036.
1) current situation: stimulated by subsidies, the installed capacity of renewable energy has increased rapidly, and the funding gap of renewable energy fund has continued to expand. According to China Power Union, by the end of 2019, the total amount in arrears of China Shanxi Guoxin Energy Corporation Limited(600617) projects has reached 327.3 billion yuan. On the demand side of subsidies, the installed capacity of new energy increased rapidly, and the national new energy development planning goal was decoupled from the scale of renewable energy fund, resulting in a rapid increase in the demand for subsidies. At the source of subsidy funds, on the one hand, because the collection standard of electricity price additional income has been maintained at 1.9 cents / kWh since 2016, and the growth rate of social power consumption is far lower than the installed capacity of new energy, the growth rate of electricity price additional income is lower than that of subsidy funds. From 2013 to 2020, the electricity price additional income of renewable energy CAGR = 20.85%, lower than 23.93% and 60.89% of wind power and photovoltaic; On the other hand, the collection and payment of electricity price additional income is not in place, and the actual collection rate of renewable electricity price additional income in 2021 is only 74.5% (estimated value).
2) future: it is expected that the renewable energy fund will be cleared in 2036. Since 2019, the state has continuously issued policies to solve the problem of insufficient compensation. Looking forward to the future, the improvement of the market-oriented trading system of green certificates and green electricity, as well as the improvement of the additional collection of renewable energy electricity price, is expected to speed up the settlement of China’s arrears of renewable energy subsidies. According to our calculation, the subsidy gap of renewable energy in that year is expected to narrow year by year after reaching the maximum (78 billion yuan) in 2019; Without considering the allocation of special financial funds, China’s renewable energy subsidy fund is expected to be cleared in 2036.
Arrears of renewable energy subsidies dragged down the financial performance of new energy operators.
1) cash flow and financial expenses: subsidy arrears not only affect the cash flow of new energy operators, but also lead to the need to increase financing for capital expenditure, while equity financing also dilutes the capital stock to a certain extent, and increasing debt financing also increases financial expenses to a certain extent.
2) provision for accounts receivable and impairment loss: the arrears of subsidies lead to generally high accounts receivable of new energy operators. The accounts receivable / income of Cecep Wind-Power Corporation(601016) and other enterprises exceeded 100% in the first three quarters of 2021. Based on the principle of prudence, some enterprises have accrued impairment loss for unpaid renewable energy subsidies. For example, China Three Gorges Renewables (Group) Co.Ltd(600905) credit impairment loss / income reached – 1.6% in the first three quarters of 2021.
Investment suggestions: in the industry, under the background of continuous policy efforts, the collection rate is expected to increase and increase the income of renewable energy funds. The promotion of green card and green power market-oriented transactions is expected to alleviate the pressure of underpayment. China’s renewable energy underpayment is expected to be gradually cleared, helping new energy operators improve cash flow and repair balance sheet and income statement. Maintain the industry “recommended rating”. In terms of individual stocks, it is recommended that Huaneng Power International Inc(600011) , China Three Gorges Renewables (Group) Co.Ltd(600905) , and Huadian Power International Corporation Limited(600027) , Shanghai Electric Power Co.Ltd(600021) , Fujian Funeng Co.Ltd(600483) , China Resources Power, China 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) , 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 warning: focus on the improvement of the company’s performance as expected; Electricity price decline risk; Electricity demand is less than expected; Risk of policy change; The collection of additional income from renewable energy electricity price is lower than expected; The calculation is subjective and for reference only.
