设正点财经为首页     加入收藏
首 页 财经新闻 主力数据 财经视频 研究报告 证券软件 内参传闻 股市学院 指标公式
你的位置: > 正点财经 > 研究报告 > 正文

Utility/Alternative Energy:China IPPs,mid-year tariff hike is a positive surprise

类型:行业研究  机构:德意志银行   研究员:Michael Tong  日期:2017-06-23
http://www.zdcj.net      点击收藏此报告
    

2.9-4.7% on-grid tariff hike without impacting end users

    The NDRC has just issued a notice requesting provincial governments to submit thermal on-grid tariff hike proposals after removing/lowering several end-user tariff surcharges starting on 1 July. In essence, the on-grid tariff hike will come from structural rebalancing along the tariff chain without impacting end-user tariffs. Based on IPPs’ 2016 geographical capacity mix, we calculate that, if the above surcharge removal is fully used to raise on-grid tariffs, the average tariff hike for the five HK-listed thermal IPPs will be in the 2.9-4.7% range. In our view, the tariff hike effective from mid-year is a positive surprise as the market has been largely expecting a tariff hike only at year-end.

    A tariff rebalancing act rather than implementation of fuel tariff pass-through

    Earlier, the State Council announced it would 1) cancel the surcharge fee of the urban public utilities surcharge (Rmb1.1cent/kWh) effective 1 April, 2) cancel the industrial structure adjustment fund (Rmb0.2-1.3cent/kWh) from 1 July, 3) reduce the national key water project fund (Rmb0.4-1.5cent/kWh) and medium-to-large sized reservoir residents resettlement fund (Rmb0.2-0.8cent/kWh) by 25% from 1 July. However, it seems only the urban public utility surcharge will be removed from end-user tariffs, while the other three elements will be offset by a corresponding on-grid thermal tariff hike, in order to partially relieve IPPs’ earnings pressure ahead of the official tariff review.

    Another tariff hike at year-end under the fuel tariff pass-through mechanism

    Compared to full-year 2015, the YTD QHD 5,500kcal coal price is Rmb150/ton or 32% higher. We currently assume a Rmb3cent/kWh tariff hike (or 7-8%), effective January 2018. We maintain our current assumption despite foreseeing potential earnings upside for 2HFY17 given the mid-year tariff hike, as we believe the market is focusing more on an FY18E earnings recovery. Nevertheless, we see potential upside to IPPs’ FY17E divs paid in mid-2018.

    Thermal IPPs at an inflection point

    As we wrote in “Advancing thermal IPPs to sector top picks” in May, we like thermal IPPs due to 1) a normalized FY18 post-tariff hike at year-end or earlier, 2) falling coal prices ahead, 3) harsh new capacity control coupled with narrowing tariff discounts on market sales, 4) valuations look attractive after a two-year underperformance, and 5) potential industry consolidation bodes well in the medium-to-long term. Our top picks are Huaneng, Huadian and CPI on laggard share price performance and continued attractive valuations.

    Thermal tariff hike also positive for wind power’s cash flow

    A thermal tariff hike, if it happens, would reduce the renewable subsidy need (for wind/solar/biomass) by an equivalent amount. Assuming a national avg. thermal tariff of Rmb0.37/kWh (excl. VAT), each 1% tariff hike could reduce the renewable subsidy fund deficit by c.Rmb2bn, in our estimates. For Longyuan/Huaneng Renewables/Fuxin, each 1% tariff hike could enhance their annual wind cash flow by around Rmb150m, Rmb90m and Rmb70m in FY18E.

    Valuation and risks

    We use DCF as the major valuation tool for utilities given their visible cash flow profile, except for some multi-business players (an SOTP approach). Industry risks include demand variance causing top-line volatility, changes in input costs without pass-through, interest rate hikes and policy risk.

相关报告:
热点推荐:
更多最新研究报告
更多财经新闻
  • 如果不能阅读报告,请点击下载阅读器
关于我们 | 商务合作 | 联系投稿 | 联系删稿 | 合作伙伴 | 法律声明 | 网站地图