The 2021 semi-annual reports released by Huaneng Power International, Huadian Power International, Guodian Power, and Datang Power recently showed that due to high fuel prices, production costs have been raised, and operations are generally under pressure. At the same time, all companies have to face challenges from the coal market, power market, carbon emissions, safety and environmental protection.

Major thermal power listed companies release 2021 semi-annual reports: coal prices raise costs and operations are generally under pressure

Rising coal prices suppress profitability

The "CECI Index Analysis Weekly Report" (issue 30 of 2021) released by the Office of China Thermal Coal Purchasing Price Index (CECI) Compilation Office on August 23 shows that the current CECI import index CIF comprehensive standard coal unit price is 1166 yuan/ton, an increase from the previous issue. 17 yuan/ton, an increase of 1.5% month-on-month, rising for 7 consecutive periods and setting a new record high.

Fuel costs generally account for 70%-80% of the production and operation costs of thermal power companies, and high thermal coal prices directly affect the performance of major power generation companies. The reporter noticed that even if Huaneng International’s electricity sales in the first half of 2021 increased by 20.80% year-on-year, rising fuel prices still dragged down its performance. The semi-annual report shows that Huaneng International's revenue, operating costs, and net profit attributable to the parent achieved 95.116 billion, 82.488 billion, and 4.282 billion respectively, representing a year-on-year increase of 20.17%, 29.74%, and -25.30%. The increase in operating costs was due to the combined effects of rising fuel prices and rising power generation.

Similarly, due to the year-on-year increase in fuel costs, Datang Power’s net profit attributable to its parent is not as good as 2020. The semi-annual report shows that during the operating period, the company achieved revenue, operating costs, and net profit attributable to the parent of 50.394 billion, 43.05 billion, and 1.636 billion, respectively, up 13.30%, 18.33%, and -7.97% year-on-year.

Huadian International's semi-annual report shows that during the reporting period, it achieved revenue, operating costs, and net profit attributable to the parent group of 53.478 billion yuan, 48.472 billion yuan, and 3.317 billion yuan, representing a year-on-year increase of 28.77%, 40.21, and 39.01% respectively. The increase in operating costs was mainly due to the increase in coal prices. In the first half of 2021, the company's fuel cost was approximately 28.184 billion yuan, an increase of 52.34% year-on-year.

Thanks to the increase in power generation and the limited increase in coal prices, Guodian Power achieved a "counterattack" in its performance in the first half of the year. The semi-annual report shows that during the reporting period, the company achieved revenue of 59.865 billion yuan, an increase of 13.86% over the same period last year; net profit attributable to the parent was 2.32 billion yuan, an increase of 272.82% over the same period last year. Guodian Electric said that in the first half of the year, the unit price of comprehensive standard coal entered into the furnace was 701.02 yuan/ton, an increase of 141.15 yuan/ton year-on-year, and the coal price increase remained at a relatively low level in the industry.

Actively transition to clean energy

The China Electricity Council recently released the "Power Industry Operation Profile from January to July 2021", as of the end of July, the country’s installed power generation capacity was 2.27 billion kilowatts, a year-on-year increase of 9.4%. Among them, the installed capacity of non-fossil energy was 1.03 billion kilowatts, a year-on-year increase of 18.0%, accounting for 45.5% of the total installed capacity. As the "new force" of non-fossil energy power generation, the above-mentioned major companies are accelerating the green transformation.

By the end of the first half of the year, Huaneng International’s installed capacity of wind power, solar power, hydropower, natural gas power, and biomass energy accounted for 21.07% of the total installed capacity. At the same time, it has built China’s largest offshore wind farm with the highest degree of localization—Jiangsu Rudong Offshore Wind Power field.

According to the semi-annual report of Datang Power, during the reporting period, the company had a total of 23 photovoltaic power projects approved, mainly in Zhejiang, Jiangxi, Guangdong and other regions. Guodian Power is also vigorously advancing the transformation of the energy structure, actively deploying Ordos' tens of millions of kilowatts of new integrated energy bases and renewable energy and hydrogen energy technology demonstration projects, and actively developing large-scale offshore wind power projects. As of the first half of the year, the installed capacity of GD Power's clean and renewable energy reached 22.377 million kilowatts, accounting for 27.16% of the total installed capacity.

Several major listed companies have deployed incremental clean power supplies and continued to optimize energy conservation and consumption reduction. During the reporting period, the coal consumption of Datang Power Generation and power supply was 287.3 g/kWh, a decrease of 2.61 g/kWh compared with the same period, and the planned target value was fully achieved. The average power supply coal consumption of Guodian Power's coal-fired generating units was 293.91 g/kWh, a decrease of 2.08 g/kWh compared with the same period in 2020.

Multiple risks cannot be ignored

Different from previous years, the "possible risks" content in the semi-annual reports of several companies has increased a lot.

The semi-annual report of Huaneng Power International shows that with the introduction of carbon peak and carbon neutral targets and related policies in China and other countries around the world, the planning and commissioning of a large number of new energy projects in the future will have a direct impact on the traditional thermal power business. At the same time, China's current capacity recovery cost mechanism is imperfect, the auxiliary service market is imperfect, and the power market orientation of unilateral price cuts restricts the effective channelling of power generation costs and increases the operating risks of thermal power business.

Huaneng International further pointed out that the national carbon emission rights trading market has been launched. Units with higher carbon emission levels will increase the cost of carbon trading compliance, and units with lower carbon emission levels can obtain emission reduction benefits. "However, the quota allocation plan for 2021 and subsequent years has not yet been issued, and the risk of gradual tightening of the quota distribution in the future, which will increase the cost of power generation, is not ruled out."

In terms of fuel, Huadian International believes that coal demand rebounds with the economic recovery, while supply is restricted by safety, environmental protection and import policies, and market prices remain high, which will have a greater impact on the profitability of coal-fired units. In addition, the release of coal production capacity is limited in the second half of the year, and the increase in output will be affected. The overall tightness of international coal resources, coupled with the sharp increase in crude oil prices, high shipping costs, and significantly narrowed domestic and foreign trade spreads, has a greater impact on the supply of imported coal.

In terms of market risk, Datang Power disclosed that the "Basic Rules for Medium and Long-term Electricity Trading" removed the restrictions on the voltage levels of access users. In principle, all power generation and utilization plans for operating power users will be liberalized. The scale of power users and market transactions will be further increased. Expansion, mid- and long-term transaction time-based contracting has started, market transactions are unprecedented in complexity, and electricity prices are facing a greater risk of price cuts. Guodian Power believes that the construction of the power spot market will soon be rolled out across the country. In the spot mode, price signals force the unit operation to perform wide-load adjustments. The number of unit starts and stops increases. It is more difficult to optimize and adjust parameters, which will affect the safety capabilities of the units. Network adaptability, operating costs, and enterprise planning systems, measurement systems, production scheduling systems, and performance appraisal systems have brought greater challenges.

The 2021 semi-annual report of major listed hydropower companies is released: performance continues to improve and carbon reduction effect is highlighted

Major domestic listed hydropower companies such as Yangtze Power, Huaneng Hydropower, Guiguan Power, SDIC Power, and Three Gorges Water Conservancy have recently released 2021 semi-annual reports (hereinafter referred to as "semi-annual reports"). The semi-annual report shows that, except for the decline in net profit of SDIC Power, the other four companies have achieved positive growth.

The China Electricity Council recently released the "Power Industry Operation Profile from January to July 2021", which shows that as of now, the country’s full-caliber hydropower installed capacity is 380 million kilowatts, a year-on-year increase of 4.8%; hydropower generation is 624.7 billion kilowatt-hours, a year-on-year decrease of 0.1%. ; The average utilization hours of hydropower equipment was 1933 hours, a decrease of 69 hours compared with the same period of the previous year.

Some analysts pointed out that China has basically formed an industry head pattern with Yangtze Power as the leader and Huaneng Hydropower, SDIC Power, Guodian Power, and Guiguan Power as the second echelon of the industry. At the same time, with the successive commissioning of Wudongde Hydropower Station and Baihetan Hydropower Station, hydropower will play a more active role under the goal of carbon peak and carbon neutrality.

Overall stable performance

As the largest listed hydropower company in the A stock market and the world's largest listed hydropower company, Yangtze River Power manages and operates six giant hydropower stations, including the Three Gorges, Gezhouba, Xiluodu, Xiangjiaba, Wudongde, and Baihetan. The semi-annual report shows that in the first half of the year, the company achieved revenue and net profit attributable to the parent of 19.901 billion yuan and 8.582 billion yuan, a year-on-year decrease of 0.06% and an increase of 8.6%, respectively.

According to the analysis by Li Rong's team of IFC Research Public and Environmental Protection, the Wudongde Power Station has been fully put into operation in the first half of the year, and the first batch of units of the Baihetan Power Station has been put into operation for power generation, and it is expected to be fully put into operation in July next year. By then, the installed capacity of Yangtze Power will increase to 63.6 million kilowatts, which is expected to exceed 100 billion kilowatt-hours of annual power generation and bring in annual revenue of more than 25 billion yuan. In addition, Three Gorges Water Conservancy, a subsidiary of Yangtze Power Holdings, achieved revenues and net profits of 4.567 billion yuan and 432 million yuan respectively in the first half of the year, an increase of 330.73% and 111.51% year-on-year.

Hydropower’s “rely on the sky” attribute is obvious, and the rise in volume and price has boosted Huaneng Hydropower’s performance. In the first half of the year, the energy storage of cascade hydropower stations in the Lancang River Basin increased year-on-year. At the same time, new green aluminum-silicon projects in Yunnan Province continued to be put into operation. Huaneng Hydropower’s power generation increased by 22.18% year-on-year, and finally realized revenue and net profit of 9.858 billion yuan and 2.694 billion yuan. A year-on-year increase of 22.14% and 94.11%.

Guiguan Power utilizes the advantages of large-scale installed capacity in the Hongshui River Basin, superimposed on the increase in the average on-grid power price of hydropower, in the first half of 2021, it will achieve revenue of 4.33 billion yuan and 1.236 billion yuan in net profit attributable to the parent, an increase of 3.49% and 24.34% year-on-year.

As the only hydropower development entity in the Yalong River Basin, SDIC Power generated 34.2 billion kWh of hydropower in the first half of the year, a year-on-year decrease of 9.5%; the price of hydropower was RMB 0.276/kWh, an increase of 11.5% year-on-year. The rise in electricity prices has weakened the impact of low incoming water. From January to June, the company realized revenue and net profit attributable to the parent of 19.289 billion yuan and 2.337 billion yuan, a year-on-year increase of 10.41% and a decrease of 24.02%.

Expand emerging business

In recent years, all listed hydropower companies have relied on their main business advantages and vigorously deployed emerging businesses.

At the end of the reporting period, Yangtze Power and its subsidiaries increased their holdings in SDIC Power to 17.69%, Sichuan Investment Energy to 14.04%, Guiguan Power to 10.46%, and Shenergy shares to 11.72%. Yangtze Power said that it will accelerate the development of smart integrated energy business along the Yangtze River Economic Belt, promote the city's green integrated energy steward model in Yueyang, Hunan and other places, and establish the Hubei Province Smart Integrated Energy Industry Technology Research Institute.

The Three Gorges Water Conservancy has also "targeted" comprehensive energy services. In the first half of the year, the company established a joint venture company and reached strategic cooperation intentions with Jiujiang City in the areas of Jiujiang City's low-carbon smart demonstration park, incremental power distribution network infrastructure construction, energy conservation and emission reduction, and green transportation. With the launch of the project, the company will officially open the integrated energy service market.

In the first half of the year, the National Development and Reform Commission and the National Energy Administration issued the "Guiding Opinions on Promoting the Integration of Power Source, Network, Load and Storage and Multi-energy Complementary Development". The 14th Five-Year Plan. Huaneng Hydropower pointed out that in the future, it will rely on the hydropower project on the Yunnan section of the Lancang River to develop scenery resources in the basin.

Guiguan Power stated that it will develop the Longtan "Water and Scenery" integrated project, continue to promote the Hongshui River's tens of thousands of kilowatts of "Water and Scenery" integrated energy base into the national plan; promote the development of offshore wind power, build two offshore wind measurement towers, and Seize the pilot project of rooftop photovoltaic policy opportunities.

SDIC Power’s semi-annual report revealed that it will build a “wind, wind, and water” complementary clean and renewable energy demonstration base in the Yalong River Basin. The first units of the two large hydropower stations at Lianghekou and Yangfanggou in the middle reaches of the Yalong River are expected to be put into operation within this year, which will increase the performance of SDIC Power.

Power trading

As the reform of the power system continues to deepen, listed hydropower companies have fully participated in the reform.

Huaneng Hydropower innovatively released annual and monthly power generation side-band curve invitation quotations. The transaction price increased by 1.7 points year-on-year, and the signed green aluminum-silicon power price increased by 1.5 points year-on-year. In addition, its capital value creation ability has continued to improve, and its market value has exceeded 100 billion yuan.

Thanks to the integration of the four networks, the revenue and net profit of the Three Gorges Water Conservancy both achieved triple-digit growth. Brokerage analysis said that after the reorganization of the Three Gorges Water Conservancy, the scope of power business coverage has expanded to Fuling District, Qianjiang District, Xiushan County, Youyang County and Liangjiang New District, and the annual power supply, service population, and number of large industrial users have greatly increased. According to the data, the company completed 1.25 billion kWh of power generation in the first half of the year, an increase of 0.7% year-on-year, sales of 6.44 billion kWh, a year-on-year increase of 23.1%, and electricity business revenue of 2.74 billion yuan, a year-on-year increase of 264.9%.

At the same time, the Shanghai Electricity Sales Company established by Three Gorges Water Conservancy in the first half of the year achieved a contracted electricity volume of 30.55 million kWh, thus opening a new situation for electricity sales outside of Chongqing. If it can obtain qualifications for the nationwide electricity trading market in the future, it is expected to achieve electricity sales in 2025. The planning target of 100 billion kilowatt-hours has been exceeded.

Keywords: engineering news, engineering construction information

Achieving carbon neutrality means that all sectors of the economy must undergo transformation. In addition, Guiguan Power established a wholly-owned subsidiary Guangxi Datang Guiguan Electric Power Marketing Co., Ltd., and jointly established the country’s first power sales company with a plant-grid joint venture with Guangxi Power Grid. The platform has been established by extending the industrial chain and cultivating new profit growth points. Editor/Sang Xiaomei