The Zhitong Finance App learned that CITIC Securities released a research report stating that the annual market electricity price results of Jiangsu Province and Guangdong Province were released, taking into account factors such as the coal price environment, downstream affordability, and the guarantee of enthusiasm for power generation. The results of both provinces were reasonable and in line with the interests of all parties. Market electricity prices in key provinces are in line with expectations and remain relatively stable. In addition to helping thermal power profits continue to recover, they are also beneficial to hydropower & nuclear power, etc., which is conducive to maintaining stable expectations throughout the industry. As differences in market expectations on electricity prices gradually decline, the high-certainty investment value of electricity may be more fully reflected in a weak macro environment.

CITIC Securities reviews are as follows:

Uncertainty about electricity price expectations has declined, and industry certainty has increased.

According to the Jiangsu Electric Power Trading Center, the total annual transaction volume of electricity in Jiangsu Province in 2024 was 360.6 billion kilowatt-hours, with an average transaction price of 452.94 yuan/megawatt-hour; in 2024, the total annual transaction volume of electricity in Guangdong Province was 258.2 billion kilowatt-hours, with an average transaction price of 465.62 yuan/megawatt-hour. The weighted average annual transaction price in Jiangsu Province increased 15.8% compared to the benchmark electricity price (391 yuan/megawatt-hour) for coal and electricity in the province, and the increase is close to the 15% national average market transaction premium expected by the bank (see “2024 Investment Strategy for the Public Environmental Protection Industry - Seize the Industry Change Cycle and Focus Determinently on Water Core” 2023-12-13). Due to the high basic electricity prices in the province, the average annual transaction price in Guangdong Province increased by only 2.8% compared to the benchmark electricity price (453 yuan/megawatt-hour) in Guangdong Province, but the absolute electricity price still exceeds about 10 yuan/megawatt-hour compared to Jiangsu Province.

The bank believes that the annual transaction results of Jiangsu and Guangdong provinces are reasonable. Under the current coal price environment, the profitability of thermal power companies will be guaranteed to a certain extent; in an environment where economic momentum is weak, terminal companies are highly sensitive to energy costs. Compared to electricity prices at the generation end under the new electricity price mechanism of capacity+electricity, electricity prices under the single electricity price system have not brought about an obvious increase in energy costs for end users.

Investment Strategy:

Market transaction results in Jiangsu Province are in line with the expectations of all parties, helping to reduce market concerns about electricity price prospects in a weak macro environment, help repair coal and electricity profits, and improve the certainty of the performance of the entire electricity industry. As differences in market expectations on electricity prices gradually decline, the high-certainty investment value of electricity may be more fully reflected in a weak macro environment.

Risk factors: Annual electricity prices in other provinces fall short of expectations; fuel costs have risen sharply; low macro demand is dragging down electricity consumption; and the market-based reform process is slower than expected.