Benefiting from the accelerated growth in electricity demand across society, improvements in traditional energy operations, and the continued green and low-carbon development trend in power generation capacity, the profitability of the A-share power sector has significantly increased.
According to statistics, in the first half of this year, A-share power companies collectively achieved a total operating income of 933.7 billion yuan, with a net profit attributable to the parent company of 99.847 billion yuan, a year-on-year increase of 18%. Approximately 90% of the companies achieved profitability, with 26 companies including Datang Power (601991.SH), Jiangsu Guoxin (002608.SZ), and Shanghai Electric (600021.SH) seeing their performance growth exceed 50%.
On September 24th, seven listed companies on the Shanghai and Shenzhen stock exchanges, including Zhejiang Energy Power (600023.SH), Datang Power, Inner Mongolia Huadian (600863.SH), Shanghai Electric, Jiangsu Guoxin, Solar Energy (000591.SZ), and Gansu Energy (000791.SZ), participated in a collective roadshow for the power industry organized by the Shanghai Stock Exchange.
During the roadshow, several listed companies responded to the opportunities brought about by the establishment of a national unified electricity market in the process of electricity market reform and their strategic layout in the new power system.
The decline in thermal coal costs is beneficial to thermal power companies.
Looking at the power generation situation, in the first half of this year, the total electricity consumption across society was 4.66 trillion kilowatt-hours, a year-on-year increase of 8.1%, with the growth rate increasing by 3.1 percentage points compared to the same period last year. In terms of thermal power, the overall domestic market price of thermal coal has shown a trend of fluctuating downward, significantly reducing the performance costs for traditional thermal power companies and significantly improving their operations.
Zhejiang Energy Power is the only platform for the overall listing and operation of thermal power assets of Zhejiang Energy Group and is the largest power generation company in Zhejiang Province. In the first half of this year, with the total operating income basically the same as the same period last year, it achieved a total profit of 5.057 billion yuan, a year-on-year increase of 43.15%; and a net profit attributable to the parent company of 3.927 billion yuan, a year-on-year increase of 41.33%.
Datang Power achieved a total operating income of 58.31 billion yuan in the first half of the year, basically the same as last year, and achieved a net profit attributable to the parent company of 3.108 billion yuan, a year-on-year increase of 104.85%. Among them, the coal power sector achieved a comprehensive profit turnaround, with a profit of 1.51 billion yuan.Looking ahead, several companies anticipate that coal and electricity prices will remain stable in the second half of the year, continuing the trend from the first half. Sun Yanwen, Secretary of the Board of Directors at Datang Power, stated that the supply and demand pattern of the domestic thermal coal market is relatively relaxed compared to the previous two years. However, the demand for coal consumption in the second half is expected to be on par with the first half, providing strong bottom support for coal prices. Nevertheless, considering high inventory levels at various stages and the significant production release flexibility of major coal mines, there is unlikely to be a sustained or substantial increase. The market situation in the second half is expected to continue as in the first half.
Inner Mongolia Huadian estimates that both coal and electricity prices will remain stable in the second half, following the trend of the first half. However, there may be minor fluctuations during specific periods such as peak summer and peak winter.
Additionally, in terms of hydropower, the water inflow situation in many regions continued to improve in the first half of this year, and the increased power generation of hydropower stations in various places also drove the profit growth of hydropower companies.
The proportion of new energy installations continues to increase. In the first half of this year, the proportion of newly added renewable energy installations nationwide reached a new high of 134 million kilowatts, a year-on-year increase of 24%, accounting for 88% of the national new power installations. As of the end of June 2024, the installed capacity of renewable energy power generation nationwide reached 1,653 million kilowatts, a year-on-year increase of 25%, accounting for approximately 53.8% of China's total power generation capacity. The combined installed capacity of wind and photovoltaic power generation reached 1,180 million kilowatts, surpassing the installed capacity of coal power, which is 1,170 million kilowatts.
Many listed companies have made significant breakthroughs in the development of clean energy in the first half of this year. Datang Energy reported that in the first half of this year, a total of 122 power source projects were approved, with an approved capacity of 4.72 million kilowatts, all of which were new energy projects. The scale of clean energy installations reached 28.61 million kilowatts, with the proportion further increasing to 38.80%, an increase of 1.05 percentage points from the end of last year.
As of the end of June 2024, the installed capacity of Shanghai Electric Power Holding was 22.6919 million kilowatts, including 3.8661 million kilowatts of wind power and 5.3576 million kilowatts of photovoltaic power, with new energy accounting for 40.6%.Gansu Energy initiated a significant asset restructuring project at the beginning of 2024, acquiring a 66% stake in Changle Company, a subsidiary of its controlling shareholder Gansu Electric Investment Group, and raising supporting funds to expand into the peak regulation thermal power business related to new energy power generation.
Gansu Energy's Chairman, Lu Jiqing, stated: "After the acquisition, the company will effectively balance the layout of clean energy power generation such as hydropower, wind power, and photovoltaic power, as well as peak regulation thermal power, forming a 'wind-solar-water-fire-storage' multi-energy complementary power structure. At the same time, it will significantly enhance the company's profitability and profit quality." Based on 2023 data, after the acquisition, the company's net profit attributable to the parent increased from 520 million yuan to 1.17 billion yuan, a 125% increase, and the return on equity increased from 5.99% to 11.53%, rising by 5.54 percentage points.
With the transformation and upgrading of the global energy structure, power companies are actively expanding into overseas markets to build a "second growth curve."
China Power is actively participating in the construction and operation of the global electricity market. Its Tokaj photovoltaic project in Hungary, with a capacity of 200,000 kilowatts, achieved full capacity grid connection in August this year. This follows the grid connection of the Victor photovoltaic project with a capacity of 132,000 kilowatts, marking the company's second new energy project in Hungary. As of the end of June 2024, Shanghai Electric's overseas installed capacity has reached 1.904 million kilowatts, with foreign assets of 24.83 billion yuan, accounting for 14.2% of total assets. The company's Deputy General Manager, Chief Accountant, and Secretary of the Board, Chen Wenhao, stated that in the future, Shanghai Electric will continue to delve into the new energy markets of countries where it already has projects, such as Japan, Hungary, Turkey, and Serbia, actively seek new country project opportunities, and steadily increase the scale of foreign installations and the level of international operation.
Electric power companies seize the "electricity reform" opportunity period.
Objectively, China has a reality where energy and electricity demand are inversely distributed. Coal resources, hydropower resources, wind and solar resources, etc., are mainly distributed in the west, south, and north regions, but electricity demand mainly comes from the central and eastern regions. Therefore, it is of great significance to build a unified national electricity market system, which aims to break geographical barriers, achieve sharing and mutual aid of electricity resources on a larger national scale, and optimize allocation, improving market efficiency and fairness, and having a profound impact on the electricity market.
Inner Mongolia Huadian's General Manager, Wang Zhenrui, stated that the Inner Mongolia Autonomous Region is an important energy base in China with abundant power generation resources and a more obvious regional advantage in power generation. With the advancement of the reform of the Mengxi power grid, Inner Mongolia Huadian will face a more open market pattern and competitive situation. The company further leverages its regional resource advantages and scale advantages, actively develops its internal potential, optimizes the power structure, and enhances the competitiveness of the enterprise.
"For traditional power companies, building a unified national electricity market system brings both opportunities and challenges," said Gu Zhonglin, Secretary of the Board of Directors of Jiangsu Guoxin. Under this market system, thermal power companies will face a broader market space, which is conducive to increasing power sales. At the same time, thermal power companies need to increase market sensitivity, flexibly adjust power generation strategies and pricing mechanisms to adapt to market competition. Moreover, they need to increase investment in technological innovation, explore the path of integrated development with new energy, to reduce carbon emissions and improve energy efficiency.
In addition, the National Development and Reform Commission, the National Energy Administration, and the National Data Bureau recently issued the "Action Plan for Accelerating the Construction of a New Type of Power System (2024-2027)", which focuses on the key areas that need to be broken through in the construction of a new type of power system in the near future, selects typical and representative directions for exploration, uses "small incisions" to solve "big problems", and enhances the grid's ability to accept, allocate, and regulate clean energy. From 2024 to 2027, nine key special actions will be carried out to promote the effective construction of a new type of power system.Datang Power Introduction: To accelerate the construction of a new type of power system, the company has made five major deployments. First, it has further increased the planning and development of large-scale new energy base projects. Second, it is striving to secure the resource reserves and development rights for offshore wind power projects. Third, it is actively promoting the construction of new-generation coal-fired power projects and accelerating the "two joint ventures" of coal power + coal and coal power + new energy. Fourth, it is actively promoting the use of advanced technology and equipment in the coal power industry. Fifth, it is actively researching and deploying emerging industries such as energy storage and hydrogen energy.
Gansu Energy Introduction: The company's main business includes hydropower, wind power, and photovoltaic power generation, and is expanding into peak regulation thermal power business related to new energy power generation. At this stage, it has made deployments in the following areas: first, enhancing the capacity to ensure power supply; second, promoting the consumption of new energy; and third, continuously improving the quality of electrical energy.
Generous Cash Dividends from Power Companies
It is undeniable that after the reform of coal power capacity pricing, the performance of power companies has improved significantly, and investors' focus has shifted to stable dividends. While listed companies actively enhance their investment value and achieve good performance, they also actively fulfill their main responsibilities. By providing stable and long-term dividends, they share the fruits of development with investors and consolidate the market's inherent stability.
Since its listing, Zhejiang Energy Power has paid a total of nearly 26 billion yuan in dividends, which is 2.6 times its direct financing. Excluding the net profit numbers for two years of losses, the company's total dividend amount accounts for 51.58% of the total net profit attributed to the parent company. In 2023, the company's dividend payout ratio was 51.42%. Wei Zheng, the Secretary of the Board of Directors of Zhejiang Energy Power, stated that in the future, the company will strive to maintain the continuity and stability of cash dividends, taking into full consideration factors such as the development stage, operating conditions, profit levels, and capital expenditures, and continue to convey the company's long-term investment value.
Since the fiscal year of 2015, Solar Power has implemented a total of 2.804 billion yuan in cash dividends, with a total of 1.497 billion yuan in cash dividends in the last three fiscal years, accounting for 108.09% of the average net profit attributed to the parent company in the last three fiscal years. The company stated that it will rigorously, proactively, and comprehensively carry out communication and information disclosure in the capital market, establish investor confidence, study strategies and paths to legally and compliantly increase investor returns, and provide investors with long-term stable cash returns.
Inner Mongolia Huadian has formulated the company's shareholder return plan in 2016, 2019, and 2021. The return plan is a three-year cycle, spanning a period of nine years. Since the implementation of the shareholder return plan, the company has paid a total of 5.26 billion yuan in cash dividends. Among them, the dividend for 2023 was 1.207 billion yuan, accounting for 70.11% of the profit available for distribution in the consolidated statement for that year, which is quite considerable.