Inner Mongolia clearly defines the development of new energy with market-oriented grid connection, and thermal power enterprises have the advantage of first-mover. Inner Mongolia has issued a notice to promote the flexible transformation of thermal power and promote the market-oriented consumption of new energy. It is mentioned that the scale of new energy connected to the market should be matched with the new regulation capacity of coal-fired power plants, and the integrated construction of new energy and coal-fired units as a whole does not have the conditions for integration. The proportion of market-oriented new energy connected to the grid built by coal-fired power plants is not less than 50%. We believe that the notice is in combination with the previous notice of the central government, "encouraging renewable energy power generation enterprises to build or purchase peak regulation capacity to increase the scale of grid connection", and made further requirements according to the local resource endowment. Continue to recommend Longyuan Power, a leading new energy company, and three Gorges Energy / China Min Energy, a pure new energy company that will develop rapidly during the 14th five-year Plan. The stock price of the traditional energy transformation new energy company China Resources Power / Huaneng International A+H/ Funeng / Geodian shares with valuation + performance improvement.
On August 26, the Energy Bureau of Inner Mongolia Autonomous region issued a notice on "implementing rules for promoting flexible Transformation of Thermal Power to promote Market-oriented absorption of New Energy in Inner Mongolia Autonomous region", which puts forward: 1) the scale of new energy connected to the market should match the new regulation capacity of coal-fired power plants, and in principle, it will not increase the existing peak regulation pressure of the system. New energy scale for market allocation = new regulation capacity / effective capacity coefficient (0.55-0.8) for flexible transformation of thermal power plants; 2) Integrated construction (new energy is physically close to coal-fired units and is equipped with centralized regulation and control within the plant) as an overall access, if there are no conditions for integrated construction, the proportion of market-oriented new energy connected to the grid built by coal-fired power plants is not less than 50%. In all construction modes, coal-fired power plants and their supporting new energy should be operated and managed by the same legal person in principle.
The policy of bundling water and fire scenery and the Internet has been guided for a long time. The Inner Mongolia Policy Department refined the central policy on August 10. The notice on encouraging renewable energy power generation enterprises to build or purchase peak regulation capacity to increase the scale of grid connection officially issued by the National Development and Reform Commission and the Energy Bureau (Development and Reform Operation (2021) No. 1138) clearly points out that at the initial stage of market-oriented grid connection projects other than indemnificatory grid connection, the peak regulation capacity is configured by self-construction, co-construction or purchase in the initial stage according to the proportion of 15% of the power (more than 4 hours). Priority should be given to grid connection according to the proportion of hooks above 20%. Peak shaving resources include pumped storage, chemical energy storage power station, gas power, photothermal power station and coal power flexible transformation and other resources. Among the above five kinds of peak regulation resources, the cost of flexibility transformation of thermal power is the lowest, followed by pumped storage, which we think will be the main body of auxiliary services such as peak regulation and frequency regulation in the construction of the new power system during the 14th five-year Plan. The policy of Inner Mongolia only makes further requirements according to the local resource endowment on the basis of the above-mentioned central policy, which may be followed by other provinces, but will not be exactly the same.
We are optimistic about the advantages of the central power enterprises / local power platforms with more thermal power assets reserves in developing new energy. We reiterate that we are optimistic about the central power enterprises and local power platforms with more thermal power assets (including gas power) reserves to develop new energy business. The trend of advance and retreat of the 14th five-year Plan is even better than that of the 13th five-year Plan, not only in terms of market-oriented allocation, but also in the integrated dispatching and auxiliary service provision in the future operation period, the companies with diversified power installation layout at the regional level will have strong competitiveness, occupy the first opportunity in the transaction of power generation rights, and even the new energy projects can better stabilize the profitability of thermal power stock under the pressure of carbon quota vs CCER in the future.
Continue to recommend new energy leaders and traditional transformational new energy companies
Continue to recommend the new energy leader Longyuan Power (target price: HK $17.00), during the 14th five-year Plan period, as the only new energy platform of the National Energy Group, it is expected to maintain the lead in installed capacity; pure new energy generation companies also have three Gorges Energy (target price: 7.11 yuan) and China Fujian Energy (target price: 6.76 yuan), which will usher in rapid development during the 14th five-year Plan. China Resources Power (target price: 26.40 Hong Kong dollars), Huaneng International Amusement (target price: 4.38 yuan / 4.29 Hong Kong dollars), Funeng shares (target price: 15.21 yuan) and Geodian shares (target price: 6.80 yuan) thermal power valuations are relatively low, but thermal power provides sufficient cash flow for new energy development. We believe that there is a logic of valuation + performance improvement in the stock price of China Resources Power (target price: HK $26.40), Huaneng International (target price: 4.38 yuan / HK $4.29), Funeng shares (target price: 15.21 yuan) and Gedian shares (target price: 6.80 yuan).
Risk hint: the flexibility transformation of thermal power is not as expected; the installation development of new energy is not as expected.
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