The national development and Reform Commission held another meeting to arrange the special verification of the signing and performance of medium and long-term coal contracts. In order to further improve the signing and performance of medium and long-term coal contracts, standardize the signing behavior, sign sufficient and firm contracts, supervise and urge strict performance, and ensure the stable and reliable supply of coal for power generation and heating, the national development and Reform Commission recently held a mobilization and deployment meeting again to arrange for special verification of the signing and performance of medium and long-term coal contracts by local and central enterprises in 2022.
In the second half of last year, the coal supply was tight and the coal price rose sharply. Last year, affected by the global covid-19 epidemic, liquidity flooding, supply bottlenecks and other factors, there was a shortage of energy supply worldwide, and the prices of international bulk commodities such as oil, natural gas, coal and iron ore rose sharply. At the same time, affected by multiple factors, China’s energy supply and demand is tight, coal prices rise sharply, and the phenomenon of “switching off and power rationing” has appeared one after another.
The performance forecast of coal power enterprises has been disclosed one after another, with serious losses. At the end of last year, the coal price rose, the fuel cost of coal-fired power enterprises rose rapidly, and the electricity price did not increase synchronously, resulting in serious losses for coal-fired power generation enterprises. Recently, listed companies began to disclose annual report information one after another. According to the disclosed data, the coal-fired power generation enterprises suffered serious losses. At the same time, we found that through the change of installed capacity structure, the profits of new energy power generation of some enterprises have covered the losses of thermal power. According to the latest data of China Resources Power, in 2021, the company’s new energy power generation profit was about HK $8.4 billion and thermal power loss was about HK $5.9 billion. The company made a profit against the market.
Recently, there is still pressure on energy supply, and the national development and Reform Commission strictly controls coal prices. Since the beginning of this year, due to the covid-19 epidemic, the shift of monetary policies of major economies, especially the intensification of geographical conflicts between Russia and Ukraine, the international commodity price situation has become more severe, complex and uncertain, and China’s energy supply has presented new pressure. Recently, with the continuous rise of foreign energy prices, the national development and Reform Commission has begun to focus on ensuring the supply and price of China’s energy. Since March, the national development and Reform Commission has held several meetings to promote the release of production capacity, increase reserves and stabilize supply and price.
The latest meeting requires full, firm and standardized medium and long-term contracts, and the coal price is expected to be controlled within a reasonable range. According to the latest meeting on March 18, the medium and long-term contracts should be fully signed, confirmed and standardized. In order to ensure that the signing and performance of contracts are in place, the national development and Reform Commission will establish a regular meeting and weekly reporting mechanism for the signing and performance of medium and long-term coal contracts, dispatch progress by provinces and central enterprises every day, and report the signing and performance every week. Under strict regulatory measures, coal prices are expected to be controlled within a reasonable range.
Under the background of strong policy regulation, coal prices are expected to be controlled in a reasonable space. At the same time, with the reform of power market, it is possible for coal-fired power generation enterprises to fully transmit the changes of fuel costs through market-oriented means. Coal fired power generation enterprises are expected to end their losses and enter a new profit cycle. We maintain the investment rating of “optimistic” in the industry, continue to be optimistic about the three main investment lines of large hydropower, scenery operators and clean energy transformation, and suggest paying attention to power operators with good cash flow. Recommend Huaneng Lancang River Hydropower Inc(600025) , Sichuan Chuantou Energy Co.Ltd(600674) , China Yangtze Power Co.Ltd(600900) , Huaneng Power International Inc(600011) electric power, Datang new energy and other companies.
Risk warning: the decline of coal price is less than expected; The reform of electricity marketization is less than expected; The consumption of new energy is less than expected;
