With the introduction of this year's interim performance forecast, the profitability of the power industry is described as "full bloom." Compared to the rainy weather in the coal industry, the power industry is mainly a thermal power company may be booming. How do we view this round of the power industry's economy?

First of all, think about sad days on a happy day

Looking back at the electric power industry, especially the thermal power industry, is the most painful period after the outbreak of the subprime mortgage crisis. For example, in the 2008 interim performance forecast, 32 listed companies in the electric power industry in Shanghai and Shenzhen have disclosed their interim results forecasts that indicate the performance expectations of the Bacheng Power Company, and Huaneng Power, which has the highest quality power assets in China, suffered losses for the first time. Behind the worrying performance, coal prices have risen sharply and electricity prices have not been adjusted accordingly. The power sector also followed a sluggish trend, and the decline ranked at the top of the industry's drop list. In the following few years, the power industry has been in a downturn, and the stock price has been lingering at low levels. It has continued to improve until the second half of 2011. The reason is that coal prices have ended in gold for ten years and have been on the decline. The cost of thermal power generation has dropped and the profitability has naturally improved. However, the continued gloomy decline in coal prices has also caused speculation that the market will lower the price of electricity after coal-electricity linkage. As coal is a non-renewable resource, coal prices will not always be low. At the peak of coal consumption in the fourth quarter of this year, the recovery of coal prices to the level of the same period of previous years is a high probability event. By then, the good days of the thermal power industry are almost at the end.

Second, electricity demand is growing but it is still in the recovery phase

At present, although the economic prosperity of the power industry has increased, it is still at a stage of recovery growth on the whole, and the development of the industry still faces many pressures and challenges. From January to June this year, the national electricity market continued the slow growth trend since the fourth quarter of last year, which was 0.9 percentage points lower than the same period of last year. Up to now, in the power structure of the Big Five, thermal power is still the absolute dominant position, accounting for about 70%. Based on the lack of growth in thermal power and the expected increase in on-grid tariffs, it is difficult for the power industry to surpass the performance of the broader market in the second half of the year. Rating to "synchronous trend." The improvement in the power industry during this period was mainly due to the decline in the prices of commodities such as coal, rather than the improvement in operating conditions and market demand. In terms of profitability, thermal coal prices will remain weak, and pressure on the cost side will be insufficient. Utilization hours will be lower in 2012, and there is little risk of continued downside. If coal prices continue to decline, the corresponding downward adjustment of electricity prices should only be a matter of time. The expectation from the on-grid tariff reduction has become the biggest killer of the industry's profitability. At the same time, under the background of energy conservation and environmental protection, the development of thermal power is limited. The lack of scale growth also affects the performance of major thermal power companies to some extent.

Once again, coal-fired electricity intermediation rescues or blocks the marketization of coal power

As the electricity price formation mechanism that reflects market supply and demand, resource scarcity, and environmental damage costs has not yet been fully established, the “coal and electricity mutual protection” policy has further suppressed the profitability of listed electric power companies. Under the intervention of the government, China's coal and electricity markets are very similar to the brothers. In the ten years of coal gold, it is “coal power”, and the government requires local coal companies to give priority to the use of coal by local power companies; now when coal enters the price bear market, it becomes “conservation coal”, ie, coal In the face of continued weak prices, some local governments have adopted administrative measures to protect local coal companies from bankruptcy. This "coal and electricity mutual protection" policy has reduced the market-based operating mechanism of electricity prices, and has also narrowed the expansion of the profitability of listed companies in the future.

Finally, prospects are still facing a lot of uncertainty

Benefiting from the decline in coal prices, power companies that used to scream for losses made a lot of money. However, this round of power boom appears in the context of economic slowdown, and there are many uncertainties in the future. Even if profits soar, this is due to its lower profit base in previous years. Electric power companies still do not think how good the profits are. Whether the coal price rebounds in winter or spring, and the thermal power listed companies' own business scope is relatively single, therefore, it may limit the performance of thermal power listed companies. Moreover, unlike the previous power industry boom cycle, China’s economy has entered an important phase of transforming the mode of development. The economic growth rate is not already at the top of the list, and the emphasis is on the quality of economic development. On the one hand, slowing economic growth will reduce the demand for electricity. On the other hand, as we all know, thermal power generation has relatively large pollution, and it will cause some damage to the environment. Renewable energy is an important new energy source in the world, which has weakened the demand for coal power to some extent. Therefore, after the thermal power listed companies in the previous period have received excess earnings from the early fall of coal, the market outlook may not only be for some of the aforementioned reasons, but the prospects for thermal power revenue may be squeezed due to thermal coal prices rebounding or rising.

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