The policy clearly crack down on bid up prices and set the coal long-term association and spot price range, which will help standardize the market order and stabilize the market coal price expectation, promote the return of coal price to a reasonable range and improve the guarantee of power supply. Considering that most of the electricity of thermal power has been locked in the price by the annual market electricity contract, and the government has a clear attitude towards controlling coal price, it is expected that the loss of thermal power industry and the improvement trend of quarterly profitability are clear. Among them, the thermal power companies with high energy consumption industries in the downstream and certain coal resource endowment have more performance flexibility. Recommend Huaneng Power International Inc(600011) (A & H), China Resources Power (H), Inner Mongolia Mengdian Huaneng Thermal Power Corporation Limited(600863) , Fujian Funeng Co.Ltd(600483) , China Power (H), Jilin Electric Power Co.Ltd(000875) , etc.
Matters: the national development and Reform Commission recently issued an announcement to clarify the four specific behaviors of operators in the coal field to bid up prices, so as to provide clear guidance for relevant operators to operate in accordance with the law, which is conducive to standardizing the order of the coal market and stabilizing market expectations.
Based on the upper limit of coal medium and long-term price range, clarify the upper limit of reasonable long-term association and spot sales price. The announcement made it clear that “raising prices substantially or in disguised form without justifiable reasons” belongs to bid up prices, which can be comprehensively considered in combination with the actual situation according to the provisions of relevant national and local documents, the subjective malice of operators, the degree of social harm and other factors. The announcement defines quantitative indicators on how to judge the significant increase in price, and puts forward the medium and long-term trading sales price of coal of the operator based on the defined upper limit of the medium and long-term trading price range of coal, which exceeds the upper limit of the reasonable range of the medium and long-term trading price specified in the relevant national or local documents, or the spot trading sales price of coal of the operator, Exceeding 50% of the upper limit of the reasonable range of medium and long-term transaction prices specified in relevant national or local documents can generally be regarded as bid up prices.
The price range is in line with the long-term interests of both coal and electricity companies. The key to follow-up is the implementation of the proportion of long-term cooperation. The tax inclusive price range of 5500 kcal underground coal in QinGang is 570 ~ 770 yuan / ton, and the corresponding upper limit of spot sales price is 1155 yuan / ton. At present, the annual long-term association price of 5500 kcal thermal coal is 720 yuan / ton, and the spot price in QinGang is about 1200 yuan / ton. The long-term association price is within a reasonable range, and the spot price slightly exceeds the upper limit. Therefore, it is clear that the upper limit of spot price has limited impact on the short-term market price. The cost base has been fully considered when formulating the reasonable range of coal medium and long-term price. The upper limit level of the price ensures that coal enterprises can still maintain high profits, and the thermal power enterprises also spread some cost pressure with the rise of market transaction electricity price. The above-mentioned limit of the price range is in line with the relationship between market supply and demand and the long-term interests of coal & power enterprises. After clarifying the long-term association and spot price range, considering the large difference between the current long-term association price and spot price of power coal, how to ensure the smooth fulfillment of the long-term association coal contract will become the key to whether coal and power enterprises can effectively reduce the cost of fuel. At present, the proportion of long-term cooperative coal in coal power enterprises is generally in the range of 60% ~ 80%. Historically, there is a game between upstream and downstream in the implementation of low-cost long-term cooperative coal. Therefore, later policy convergence is also needed to ensure the smooth realization of long-term cooperative coal.
It is estimated that the annual profit per kilowatt hour of thermal power enterprises is about 0.01 ~ 0.02 yuan / kWh. Considering the market supply and demand, we expect that the actual purchase prices of long-term cooperation and spot of coal and power enterprises will be close to the upper edge of their respective price ranges. Under the condition that the price range constraint effect is very strong and the long-term cooperative coal is fully realized, we expect the average standard coal price of China’s coastal thermal power enterprises to be about 1000 yuan / ton, the operating cost of kilowatt hour power is about 0.39 yuan / kWh, and the profit of kilowatt hour power is about 0.01 ~ 0.02 yuan / kWh. Thermal power enterprises can reverse the huge loss situation last year and make profits.
Considering that most of the power of most thermal power companies have locked in the electricity price through the annual contract, if the coal price decreases significantly in the future, the profitability of thermal power enterprises is expected to be further repaired at that time.
Risk factors: the price range is not implemented as expected; The implementation proportion of coal long-term association is low, and the market electricity price has decreased significantly.
Investment strategy. The policy clearly crack down on bid up prices and set the long-term association and spot price range, which will help standardize the order of the coal market and stabilize the market price expectation, promote the return of coal prices to a reasonable range and improve the security of power supply.
Considering that most of the electricity of thermal power has been locked in the price by the annual market electricity contract, and the government has a clear attitude to control the coal price, it is expected that the loss of the thermal power industry and the improvement trend of quarterly profitability are clear. Among them, the thermal power companies with high downstream energy consuming industries and coal resource endowment are more flexible in performance. It is recommended that Huaneng Power International Inc(600011) (A & H), China Resources Power (H), Inner Mongolia Mengdian Huaneng Thermal Power Corporation Limited(600863) , Fujian Funeng Co.Ltd(600483) , China Power (H), Jilin Electric Power Co.Ltd(000875) , etc.
