Event:
Longi Green Energy Technology Co.Ltd(601012) announced that the Yunnan development and Reform Commission cancelled the preferential tariff policies and measures enjoyed by the company in Yunnan Province.
Key investment points:
The preferential electricity price policy for electrolytic aluminum in Yunnan Province in 2021 has been announced to be cancelled. Yunnan is endowed with excellent hydropower resources. In the past, serious “power abandonment” occurred due to the imbalance between power consumption and industrial development in the province. In 2016, Yunnan abandoned 31.4 billion kwh of water, equivalent to 11.7% of total power generation. In order to absorb the surplus electricity, in 2017, Yunnan Provincial Development and Reform Commission announced the introduction of hydropower aluminum and hydropower silicon through preferential electricity price, so as to promote the consumption of waste water and electricity, and form a win-win situation for power generation, supply and consumption enterprises. In 2020, the output of electrolytic aluminum in Yunnan Province increased by 2.6 million tons, a year-on-year increase of 72%, and the mismatch between power supply and demand has been significantly alleviated. Under the background of dual control of energy consumption, in November 2021, Yunnan Provincial Development and Reform Commission announced the cancellation of the preferential electricity price policy for electrolytic aluminum industry and the implementation of stepped electricity price from January 1, 2022.
In recent years, Yunnan power supply and demand is tight, and the electricity price continues to rise. Since the promulgation of the preferential electricity price policy in Yunnan Province, the trading volume and price of electricity have continued to rise. In 2021, the power consumption of Yunnan Province was 213.8 billion kwh, an increase of 5.53% year-on-year in 2020 and 17.99% year-on-year in 2019; With the continuous rise of power demand, the utilization hours of thermal power have also increased from 1236 hours in 2017 to 2797 hours in 2021. Under the background of tight power supply and demand, the electricity price in Yunnan Province continued to rise. In March 2022, the average transaction price of power plants in Yunnan Province was 026626 yuan / kWh, up 6.35% from 025036 yuan / kwh in March 2021 and 11.28% from 023927 yuan / kwh in March 2020.
Huaneng Lancang River Hydropower Inc(600025) is expected to benefit from the rising electricity price in Yunnan. Affected by the dry water from Lancang River Basin, 60 Zhejiang Rifa Precision Machinery Co.Ltd(002520) 21 generated 94.396 billion kwh, a year-on-year decrease of 3.25%. However, benefiting from the rising electricity price, the profit of Huaneng Lancang River Hydropower Inc(600025) kwh increased from 0.049 yuan / kwh in 2020 to 0.062 yuan / kwh in 2021, with a year-on-year increase of 26%. Considering the special cost structure of hydropower, there is no marginal cost, and under the background of rising electricity price, the upstream power enterprises are expected to improve their performance. Huaneng Lancang River Hydropower Inc(600025) has the first installed capacity in Yunnan Province, and its performance may be more flexible.
Industry rating and investment strategy Yunnan province cancels the preferential price policy for hydropower and silicon enterprises, and the upstream power generation enterprises are expected to benefit from the upward price. Maintain the industry “recommended” rating and recommend Huaneng Lancang River Hydropower Inc(600025) .
The risk indicates the risk of macroeconomic downturn, the policy is less than expected, the price fluctuation risk, the power demand is less than expected, the incoming water is less than expected, and the market competition is intensified.
