Event overview: on April 20, Premier Li Keqiang chaired an executive meeting of the State Council to deploy measures to further improve agricultural production in spring and determine measures to ensure and increase energy supply.
Expected one: increase in coal production. As we have previously predicted, the “power restriction” and “production restriction” caused by high coal prices in 2021 have led to a rapid decline in the power demand of the whole society dominated by secondary production; After the unprecedented huge losses of coal power enterprises, the rapidly rising electricity price has further suppressed the demand for electricity. In March 2022, the electricity consumption of the whole society increased by 3.5% year-on-year, of which the growth rate of secondary production fell to 2.3%; However, the price of thermal coal rose further in March. Under the requirements of ensuring the economy and demand, it is inevitable to increase coal production. The national standing committee meeting requires that “through nuclear capacity increase and new production, the new capacity of 300 million tons this year” is in line with the expectation.
Expected 2: approve 6 nuclear power units. The approval of new nuclear power units in 2021 is expected to experience a roller coaster interpretation. In April 2021, after the national Standing Committee approved five units of “four large and one small” to CNNC at one time, the market and industry’s expectation for new units throughout the year increased from 6-8 to 9-10; However, after the Taishan 1 nuclear fuel rod incident, no unit of Guangdong nuclear power was released throughout the year. Previously, we proposed that the approval of new units in 2022 still needs to be accelerated to ensure the healthy development of the nuclear power industry and the orderly promotion of the dual carbon goal. The approval of 6 units meets the expectation.
Unexpected: bring the dead back to life. The six new units are not unexpected. Unexpectedly, four of the six units are cap1000 (localized version of Westinghouse third generation nuclear power technology AP1000). After the world’s first AP1000 reactor Sanmen 1 was put into operation in 2018 and three other demonstration project units Sanmen 2, Haiyang 1 and Haiyang 2 were successively put into operation, Sino US relations deteriorated rapidly, and it was always difficult to make progress in subsequent projects of this reactor type, including Xu Dabao 1, Sanmen, Lufeng and other projects originally planned to adopt AP1000. After the approval was delayed, the planning was also adjusted in the past two years, The domestic third-generation nuclear power hpr1000 (Hualong 1) will be re promoted as the reactor type route selection of subsequent projects. The approval of Haiyang phase II and Sanmen phase II this time can avoid the waste of a large amount of funds invested in preliminary preparations. Taking CNNC as an example, by the end of June 2021, Sanmen phase II had invested 8.9 billion yuan, and xudabao phase I and phase II had invested 14.3 billion yuan in total. The approval and promotion of the project can avoid the daily loss of asset impairment.
Investment suggestion: in addition to food security, the focus of this regular meeting is energy security. Increasing coal production and stabilizing coal price are conducive to the thermal power enterprises to get rid of the current operating difficulties. Shenergy Company Limited(600642) ; The approval of new nuclear power units is in line with expectations, and the revival of AP1000 stock projects can avoid potential asset impairment losses of relevant companies. It is recommended that China National Nuclear Power Co.Ltd(601985) , and Cgn Power Co.Ltd(003816) .
Risk tip: declining demand; Price reduction; Rising costs; Reduction of precipitation; Policy promotion lags behind.
