Recently, Shangao Renewable Energy officially released its 2023 annual results and ESG report. In 2023, the company firmly grasped the main theme of wind power, photovoltaic, and new energy generation. The company's financial risk was completely eliminated, the survival dilemma was completely solved, the asset quality was consolidated and consolidated, sustainable development and ESG work protected the company's high-quality development. The internal mechanism operated in an orderly manner, business vitality increased significantly, incremental development was steady and far-reaching, and all aspects of work were gaining momentum.

Judging from the annual performance of Shangao New Energy in 2023, it can be summed up by “high-quality development”.

In 2023, Shangao New Energy achieved total annual revenue of HK$4.963 billion; total profit reached HK$630 million, an increase of 122% over the previous year. The core data is impressive, and in particular, the significant increase in profitability is remarkable. On the basis of turning losses into profits last year, the company's net profit reached HK$387 million, an increase of 72% over the previous year, and the net profit margin also increased from 4.3% in 2022 to 7.8%.

Photo Source: Company Announcements

From a macro perspective, the new energy industry, as an important development engine driving the country's economy, has laid a solid foundation for improving the profitability of Shangao New Energy. But this is not enough to explain Shankao New Energy's excellent performance in doubling its profit level.

According to the company's financial report, this is largely due to the company focusing on the main new energy business and continuing to increase investment, thereby increasing revenue and profits from the new energy business, and further establishing its pioneering position in the field of new energy power generation. This is most intuitively reflected in the amount of electricity generated. The amount of power generation is mainly determined by the installed capacity and number of hours used. Looking at Shangao New Energy's power plant resources, the company has now formed a trend of rapid development of wind power generation dominated by photovoltaics. As of December 31, 2023, the company has 54 centralized photovoltaic power plants, 19 wind power plants and more than 200 distributed photovoltaic power plants at home and abroad. In 2023, the company's consolidated statement completed more than 5.6 billion kilowatts of power generation, an increase of about 14.5% over the same period last year. Among them, centralized photovoltaic power plants generated about 2.93 billion kilowatts, and wind power generated about 2.07 billion kilowatts, respectively.

Entering 2024, although the number of hours used for solar power generation and wind power generation in January-February in China was lower than the same period last year, Shangao Renewable Energy had a good start. From the January and February 2024 power generation data released by the company, it can be seen that the company's completed power generation has increased significantly compared to the same period last year.

Table: The company's power generation statistics for January-February 2024

Data source: Company announcement

The power generation data for the first quarter of 2023 and 2024 shows the company's strong growth trend, which not only proves the company's ability to efficiently manage and operate existing projects, but also shows the positive impact the company has had on overall performance through continuous expansion of business and investment in new energy projects over the past year. The outstanding performance of Shangao New Energy in operating new energy power generation assets this year further shows that the company has fully consolidated and expanded the growth points it has already discovered, and continues to promote the company's steady development.

Take the Heze 381.25MW wind power project as an example. The project is located in the Heze region with large wind energy reserves and a high wind shear index. It has a high return on investment. The total investment is estimated to be 2 billion yuan, and the annual power generation capacity is 1 billion kilowatts. The project completed all preliminary formalities and site seat survey work in April of this year, and construction officially began.

Not long ago, Shangao Renewable Energy also successfully signed a 510MW wind power project during a centralized wind power project signing ceremony organized by the People's Government of Zhaoping County in Hezhou City, ranking first among the signatory companies. The total investment of the project is estimated at about 4 billion yuan.

In 2023, the company successfully won the bid for the 200MW centralized photovoltaic project in Linfen, Shanxi, the 100MW photovoltaic project in Yizheng, Jiangsu, and the 81 MW agricultural and solar complementary distributed distributed in Jinzhou Yixian County, Nanyang, “100MW wind power+smart energy storage”, and the 100MW photovoltaic project in Dabancheng, Xinjiang, through linkage between the upper and lower industrial chains to target a series of distributed strategic major customer projects. The above projects are all high-quality assets in the field of new energy. Along with winning bids and smooth progress of a series of projects, they can bring huge cash flow support to Shangao New Energy, accelerate the company's expansion and progress of subsequent projects, and thus bring considerable revenue and profits to the company.

In the context of the rapid development of the new energy industry and the company's own differentiated competition model, it can be said that the company's growth has been effectively confirmed, and it also provides strong support for the company's ability development, which is conducive to the company's smooth investment and cooperation in the future, and provides a solid foundation for winning market confidence.

Continued investment expansion and diversified collaborative layout are inseparable from a strong financial base. It is worth mentioning that at the end of last year, Tianjin Fuhuan, a subsidiary of Shangao Renewable Energy, received a cash capital increase of 5 billion yuan (equivalent to about HK$5.45 billion) from Ping An Asset Management Co., Ltd., a subsidiary of China Ping An Insurance Group, and the first installment of RMB 4 billion was paid on December 13 last year. The successful introduction of major investment has further enriched the level of funds on the books of Shangao New Energy and provided a sufficient guarantee for the continued investment in the company's business. Financial reports show that as of the end of last year, the company held about HK$4.9 billion in cash and cash equivalents, an increase of 35% over the previous year. In 2023, the net operating cash inflow was approximately HK$2.0 billion, the net cash outflow from investment was approximately HK$2.57 billion, and the net cash inflow from financing was approximately HK$1.24 billion.

Looking to the future, what can Shankao New Energy look forward to?

Looking at it from a longer perspective, the market is also continuously sending positive signals to promote the development of the new energy industry. Industry pioneers such as Shankao New Energy, which focus on green and sustainable development fields such as new energy and new infrastructure, are facing rare opportunities, and Shankao New Energy is also continuing to seek more possibilities. In December 2023, the company's new energy+transportation project case was selected for Global Network's 2023 ESG white paper and was awarded “ESG Practice Case - Innovative Green Infrastructure Upgrading Model”.

First, Shangao New Energy achieved a “zero” breakthrough in green power transactions, continuously opening up room for growth and imagination.

Recently, Shangao New Energy's Jiangsu Baoying Luduo PV Project and Guangdong Kaiping PV Project respectively completed monthly green power transactions in the province, with a transaction volume of 12 million kilowatt-hours and achieved green power revenue of about 480,000 yuan. The company is expected to achieve 120 million green power transactions in 2024, and green power revenue will exceed 4.8 million yuan.

What does that mean?

As an important concept in the process of enterprises achieving a low-carbon transformation of electricity consumption structures, green power is related to the low-carbon operation results of each enterprise. As companies' demand for clean energy continues to increase, industry prospects continue to be promising, and opportunities for the company's development are constantly opening up.

Looking back at the full year of 2023, green power transactions have grown by leaps and bounds. According to public information, in 2023, the Beijing-Tianjin-Hebei region completed annual green power transactions exceeding 23 billion kilowatt-hours, of which Beijing purchased 1,657 billion kilowatt-hours of green electricity, an increase of 2.6 times over the previous year.

At the same time, the share of new energy consumption is also gradually rising. According to data from the National Energy Administration, in the first quarter of 2024, the country's renewable energy generation capacity reached 687.5 billion kilowatt-hours, of which wind power photovoltaic power generation increased 25% year on year. Industry insiders pointed out that with the proposed “dual carbon” target driving the domestic consumption ratio of new energy sources to continue to rise, demand in the green power market will undoubtedly continue to expand.

CITIC Construction Investment also stated in this regard that in this context, the scale of participation of wind power generation in green power transactions is expected to continue to increase, the environmental value of new energy projects is expected to gradually be realized, and the business performance of new energy power generation operators is expected to improve.

In addition, the green power green license transaction recently welcomed substantial policy benefits. On January 22, 2024, the National Energy Administration issued the “Key Energy Supervision Work Points 2024", which emphasizes that it will gradually expand the share of market-based energy transactions, establish and improve the green power trading mechanism, study and introduce relevant regulations on green power transactions, gradually expand the scale of green power transactions, and focus on solving problems such as the high demand for enterprises to buy green power and the difficulty of green power transactions across provinces and regions.

Shankao New Energy will also benefit from the booming operation of the industry, along with the company actively promoting the implementation of green power transactions, thereby maintaining a leading position in the rapid development of the industry and bringing more room for certainty and imagination for its future growth and release of value potential.

Second, on the basis of a steady power generation business, Shangao New Energy is also strategically expanding its new energy operation business. Relying on its specialized operation and maintenance platform, it is committed to the operation and maintenance of new energy power plants, preservation and value addition, and has contracting capabilities for asset management, operation and maintenance, and technical improvement.

As an important component of the new energy system and a key carrier for achieving the “double carbon” goal, the scale of new energy systems is also increasing year by year as the share of new energy sources such as wind power and photovoltaics continues to increase. According to data from the National Energy Administration, China's total installed renewable energy capacity exceeded 1.4 billion kilowatts in 2023, accounting for more than 50% of the country's total installed power generation capacity. Entering 2024, this figure achieved a new breakthrough. In the first quarter, the country added 63.67 million kilowatts of installed renewable energy, an increase of 34% over the previous year, and the total scale reached 1,585 billion kilowatts, which strongly promoted the green and low-carbon transformation of energy.

As the scale of new energy plants continues to increase, problems such as wide distribution of power plants, large number of equipment, inefficient personnel management, and single operation and maintenance methods have gradually come to light. In the current context, proxy operation and maintenance have played an important role. According to information, the company completed more than 2 GW of external operation and maintenance projects in 2023, and the scale of the contract operation and maintenance market is growing steadily. In April of this year, Taian Municipal Warwick Energy Technology Co., Ltd., a subsidiary of Shangao New Energy, successively won bids for the China Power Investment Group's Yunnan Jiulongshan Wind Farm and Shanxi Maojiawan Wind Farm fan maintenance projects. According to reports, the total scale of the two winning projects is nearly 200MW.

This service not only satisfies the diverse needs of customers, but also forms a synergy effect with the company's power generation business and new infrastructure business, which can further strengthen the company's brand power and bring more diversified growth momentum to enterprise development.

Again, Shangao New Energy continues to explore the new energy+big data industry and continuously promote the implementation of related projects.

Under the current wave of AI, generative artificial intelligence systems consume far more electricity than expected, and the view that “the end of computing power is energy” has gradually been recognized by the market, giving Shangao New Energy a historic opportunity.

According to a survey by the Research Center of the Chinese Academy of Sciences, the digital energy industry, as an important part of the low-carbon economy, is rapidly expanding in size, from 654.42 billion in 2015 to 1105.15 billion in 2022.

Data source: Institute of Chinese Academy of Sciences

The “Certain Opinions of the National Energy Administration on Accelerating the Digital and Intelligent Development of Energy” also further clarifies the direction, goals and key tasks of digital and intelligent energy development, and emphasizes “effectively raising the level of digital and intelligent energy development, promoting the development of a digital energy economy and a green low-carbon circular economy, building a clean, low-carbon, safe and efficient energy system, and providing strong support for actively and steadily promoting carbon neutrality at peak carbon.”

Shangao Holdings, the majority shareholder of the company, has keenly grasped national policy guidance and market opportunities, and in November of last year planned to subscribe for new common shares of Century Internet, one of China's leading third-party neutral data center service providers and a US stock listed company. This strategic initiative will strongly promote the company's layout in the field of new digital infrastructure and achieve the collaborative development of its green energy industry and data center industry. It will accelerate the transformation of energy-intensive data center business to a more environmentally friendly and low-carbon direction, thus establishing an ecological closed loop of “green electricity+computing power”.

Seen from this, the competitive advantage that Shankao New Energy has established over a long period of time in the field of scenery and new digital infrastructure, as well as the advance layout of the new digital infrastructure circuit, should have taken a share of the pie in this market full of room for imagination.

Shangao New Energy's advance layout in the digital energy industry has also borne fruit. The company issued a press release in March of this year stating that the company and Century Internet officially signed a big data and new energy framework agreement with the Ulanqab Municipal Government to strengthen cooperation between the three parties in new energy project development and industrial collaboration, marking that Shankao New Energy has taken an important step in promoting the implementation of a new model of “integrated source network load and storage”. The management also revealed that the group promotes investment and development of wind power photovoltaic projects in Qinghai, Inner Mongolia and other places and green power applications in data centers, taking advantage of the “power+computing power” synergy to help the green transformation and high-quality development of the local economy.

In addition to this, in March of this year, Shangao Renewable Energy also targeted overseas clean energy businesses and set up joint ventures with Shandong International Cooperation and Shandong High Speed Energy Development to focus on overseas photovoltaic power generation, wind power generation, energy storage and charging, and smart energy management and control systems.

Through the cooperation of the three companies, it is possible not only to form a synergy effect, improve the efficiency of development, operation and capital utilization, and help Shangao New Energy further expand its strategic layout areas. More importantly, if this cooperation progresses smoothly, it can be used as a typical example of developing overseas markets, and can provide sufficient experience for Shangao New Energy in developing more overseas markets, thus pushing the company into a new stage of rapid development.

epilogue

It is worth mentioning that Shangao New Energy attaches importance to investors' requirements for sustainable development and high-quality growth. Over the past year, the company has performed excellently in ESG management and clean energy investment. In 2023, the company's domestic and international ESG ratings improved significantly. Among them, S&P's global ESG rating reached the global utility average, and Wande's ESG market rating was A.

Overall, in the context of the country's promotion of a green and low-carbon energy transition, Shangao Renewable Energy is responding positively to the country's “dual carbon” goal. Through continuous technological innovation and service optimization, it provides a cleaner and more reliable energy supply to the community, showing a strong growth momentum and leading edge in the industry.

The company has not only achieved significant growth in financial performance, but has continuously consolidated and expanded its market share in the field of new energy through active project layout and industrial chain expansion, and has continued to make breakthrough progress in promoting sustainable development, bringing solid support to expand the company's growth space and own value.

Currently, the company's growth path is becoming more and more clear. With the expansion of the company's new energy operation business and the forward-looking layout of the digital energy industry, Shangao New Energy is gradually building a clean, efficient, and sustainable energy ecosystem, and long-term stable corporate value is gradually showing. The market should pay more attention and expectations to such an enterprise that is in an upward stage of development.