中國(guó)水電行業(yè)：強(qiáng)勁的增長(zhǎng)前景和高股息可見度

1、 cGlobal Research16 April 2021China Hydropower SectorStronger growth outlook with high dividend visibilityWe expect further hydropower installationsAs the largest clean energy source, hydropower could play a critical role in Chinas transition to becoming carbon neutral. With the 14th Five-year Plan

2、(FYP), we expect hydropower capacity growth to reaccelerate, driven by: 1) substantial exploitable hydro resources of over 170GW (370GW currently); 2) potential installation boom in 2021- 22E driven by new projects; and 3) accelerated growth of pumped-storage hydropower to meet increasing energy sto

3、rage demand. We forecast 17.6GW pa capacity addition in 2021-25, similar to the pre-2015 level, with accumulated capacity reaching 458GW. We believe the commissioning of major hydropower plants should contribute substantial earnings growth for the listed companies.Utilisation hours and tariffs could

4、 remain stableWe expect hydropower utilisation to remain stable for the next few years, driven byfavourable policy supporting the priority dispatch of hydropower with guaranteed utilisation hours; and 2) increasing demand to meet the renewables consumption quota. In addition, we expect limited downs

5、ide for on-grid tariffs, due to: 1) a narrowing tariff discount on market volumes; and 2) a stabilising coal-fired benchmark tariff, which is correlated with the hydropower on-grid tariff based on the netback pricing mechanism.Attractive dividend yield supported by strong cash flowHydropower has str

6、ong cash flow with OCF which could cover more than its capex; we expect 16% average FCF yield in 2022, compared with 7% for other renewable energy peers. The actual lifespan of hydropower plants is normally longer than their depreciation period (50-60 compared with 30-40 years), which implies additi

7、onal cash returns in the long run. Our dividend yield estimate of 3.8% for 2022 is higher than our 2.5% estimate for renewable energy peers. In the long run, companies with ample cash flow might consider higher dividend payout to incentivise investors.Top pick: China Yangtze Power; add to UBS APAC K

8、ey Call listThe sector average of 1.7x 2022E P/BV is higher than the historical mean and the utilities peer average of 1.1x; we attribute this to solid cash flow with no subsidy issues and strong ROE (2020E 13.9% vs 9%). We have Buy ratings on CYPC and SDIC and upgrade Chuantou Energy from Neutral t

9、o Buy. Our top pick is CYPC (Key Call), given its largest earnings upside from potential asset injections and highest dividend yield.Figure 1: Valuation comparisonEnergyChinaEquitiesYishu YanAnalyst S1460520110001 HYPERLINK mailto:yishu.yan yishu.yan+86-21-3866 8782TickerShare PricePriceRatingMarket

10、 CapP/E (X)P/B (X)ROE (%)Dividend yield % Dividend payout %Target(Local mn)CompanyRmb(Rmb)NewOld2021E2022E2021E2022E2021E2022E2021E2022E2021E2022ECYPC600900.SS20.7628.00BuyBuy472,12117.414.92.72.016%15%4.0%4.7%70%70%SDIC600886.SS10.1612.10BuyBuy70,77312.111.21.41.312%12%2.9%3.1%35%35%Chuantou600674.

11、SS12.1215.40BuyNeutral53,38515.213.71.91.813%13%3.3%3.7%51%51%Above data as at 14 April 2021. Source: Thompson Reuters, WIND, UBS-S estimates HYPERLINK / This report has been prepared by UBS Securities Co. Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantita

12、tive Research Review published by UBS, begin on page 22. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider

13、this report as only a single factor in making their investment decision.China Hydropower SectorUBS-S Research THESIS MAPa guide to our thinking and whats where in this reportMOST FAVOUREDLEAST FAVOUREDChina Yangtze PowerN/APIVOTAL QUESTIONSQ: Can we expect more hydropower installations in the next f

14、ive years?Yes. We expect hydropower to play a critical role in Chinas transition to becoming carbon neutral because of its lowest cost, peak load regulation capability, and energy storage. We expect capacity growth to reaccelerate in the 14th FYP (2021-25), driven by: 1) substantial exploitable hydr

15、opower resources of over 170GW; 2) a potential installation boom in 2021-22E driven by the commissioning of major hydropower projects; and 3) accelerating growth of pumped-storage hydropower to meet increasing demand for energy storage. We forecast 17.6GW pa capacity addition in 2021-25, similar to

16、the pre-2015 level.Q: Is there downside risk to hydropower utilisation hours and tariffs? HYPERLINK l _bookmark2 moreUnlikely. Hydropower utilisation hours have rebounded since 2018, and we expect them to remain stable for the next few years, driven by: 1) favourable policy supporting the priority d

17、ispatch of hydropower with guaranteed utilisation hours; and 2) increasing demand for renewable power to meet the renewables consumption quota. In addition, we expect limited downside for on-grid tariffs, given: 1) the narrowing tariff discount on market volumes, because of stronger electricity dema

18、nd; 2) a stabilising coal-fired benchmark tariff, which is correlated to the hydropower tariff with the netback pricing mechanism. HYPERLINK l _bookmark3 moreUBS-S VIEWWe expect more hydropower capacity, driven by Chinas ambitious carbon-neutral target. We prefer CYPC in the hydropower sector, given

19、: 1) possible significant earnings accretion from the potential injection of the Wudongde and Baihetan assets; 2) its 4.7% dividend yield is the highest among hydropower stocks; and 3) we expect further upside to dividend payout after the asset injections.EVIDENCE1) Hydropower LCOE (levelised cost o

20、f energy) is Rmb0.2/kWh, below the Rmb0.27-0.53/kWh of other power sources. 2) Based on the netback pricing mechanism, its on-grid tariff is only Rmb0.24/kWh, also the lowest of all power sources. 3) China still has more than 170GW hydropower capacity growth potential, according to the Ministry of W

21、ater Resources. 3) There are 30GW pumped-storage hydropower projects under construction and construction of over 20GW could begin under the 14th FYP.WHATS PRICED IN?The sector is trading at 1.7x 2022E P/BV, higher than the historical mean and of other clean energy IPPs (1-1.5x P/BV); we this attribu

22、te to the solid cash flow with no subsidy receivable issues. We think the 2022 dividend yield average is attractive at 3.8%, higher than the other clean energy peer average of 2.5%. We believe the market has not fully priced in potential capacity growth and dividend payout upside supported by the st

23、rong cash flow. HYPERLINK l _bookmark4 moreFigure 2: Capacity growth to reaccelerate in the 14th FYPFigure 3: We think the dividend yield from hydropower is attractive6%5%4%3%2%1%0%2022E Dividend yieldSource: China Electricity Council, UBS-S estimatesSource: China Electricity Council, UBS-S estimate

24、sChina Hydropower SectorUBS-S ResearchPIVOTAL QUESTIONS HYPERLINK l _bookmark0 return Q: Can we expect more hydropower installations in the next five years?UBS-S VIEWYes. We expect hydropower to become a vital renewable energy source that would support Chinas ambitious goal to become carbon neutral,

25、 given its lowest on-grid tariff and highest efficiency for peak load regulation and energy storage, which could enable the large expansion of intermittent power sources such as wind and solar. We expect 17.6GW pa capacity addition in the 14th FYP (2021-25), higher than the 10GW pa in the 13th FYP (

26、2015-20). We expect an installation boom in 2021-22, with 23GW per annum capacity addition, driven mainly by the commissioning of large hydropower projects such as Wudongde and Baihetan for CYPC, and Lianghekou and Yangfanggou for SDIC and Chuantou. We forecast 14GW pa addition in 2023-25, with slow

27、er addition of conventional hydropower projects but faster growth of pumped-storage hydropower.EVIDENCEHydropowers on-grid tariff is only Rmb0.24/kWh, the lowest of all power sources, with 2020 LCOE of only Rmb0.2/kWh (Rmb0.27-0.53/kWh for other power sources). 2) The technical exploitable hydropowe

28、r capacity is 542GW, according to the Ministry of Water Resources, implying more than 170GW exploitable capacity. 3) Key projects that are to be commissioned in 2021-23 include Wudongde, Baihetan, Lianghekou and Yangfanggou with 30.7GW. 4) We expect 55GW pumped-storage capacity to be constructed and

29、 30GW to be commissioned in 2021-25.WHATS PRICED IN?The hydropower sector is trading at 1.7x2022E P/BV, higher than its historical average and of other A-share renewable operators that are trading at 1.2x P/BV. The sector deserves a higher valuation, given: 1) its strong cash flow with no subsidy re

30、ceivable issues; and 2) more attractive dividend yield, in our view.Hydropower is critical to China becoming carbon neutral in 2060In September 2020, China pledged to become carbon neutral by 2060 and carbon emissions to peak by 2030. To achieve this ambitious net carbon zero goal, China aims to: 1)

31、 raise the primary energy mix target of non-fossil fuels to 25% by 2030;further cut carbon intensity per unit of GDP by 2030 to more than 65% compared with 2005 (from the 60-65% reduction target previously); andintroduce an installed capacity target of over 1,200GW in wind and solar by 2030.We belie

32、ve hydropower will play an important role in meeting the carbon-neutral goal, given its stability and cost competitiveness compared with wind and solar.Hydropower is the cheapest power sourceThe hydropower on-grid tariff is lower than of coal-fired power, and much lower than of wind and solar, becau

33、se of its lower costs. The average on-grid tariff forhydropower is Rmb0.24/kWh, lower than the Rmb0.35/kWh for coal-fired power, and also much lower than the wind, solar and nuclear of Rmb0.37-0.43/kWh.Figure 4: Average on-grid tariff for different power sources (2020)(Rmb/kWh)0.500.450.400.350.300.

34、250.200.150.100.050.00HydroCoal-firedWindSolarNuclearSource: National Development and Reform Commission (NDRC), UBS-SLower raw material costThis is mainly due to hydropowers near zero raw material cost and high utilisation hours. As the only raw material input is water, hydropower does not have any

35、raw material cost. Therefore in its cost structure, depreciation cost takes the largest part of around 54% of total cost. In comparison, for thermal and nuclear power, raw material cost accounts for 70% and 25% of the total power generation cost, respectively, which means their profitability is sens

36、itive to changes in raw material (eg, coal and uranium) prices.Figure 5: Breakdown of total power generation cost (2020)100%90%80%70%60%50%40%30%20%10%0%11%5%10%5%20%25%30%24%15%35%25%50%65%70%40%45%25%HydroThermalNuclearWindSolarFuel costDepreciationLabor and maintenance costOthersSource: Company d

37、ata, UBS-S estimatesHydropower has better profitabilityBenefitting from its near zero raw material cost and high utilisation hours, hydropower has the lowest per kWh power generation cost among major power sources. Under the current on-grid tariff mechanism, hydropower has been leading in profitabil

38、ity. We estimate the LCOE for hydropower is Rmb0.20/kWh, lower than the Rmb0.3/kWh for coal-fired power, and also lower than the Rmb0.27- 0.28/kWh for solar and wind.Figure 6: LCOE of different power sources in 2020Rmb/kWh0.60.50.40.30.20.10HydroCoal-firedWindSolarNuclearGasSource: International Ren

39、ewable Energy Agency (IRENA), UBS-SDepreciation years shorter than actual life-span, providing long-term returnsRegarding the change in depreciation and working capital in the long run, we expect relatively diminishing effect. Currently, most hydropower companies are using 30-40 years as their depre

40、ciation period. But the actual life span of hydropower projects could be longer than 50-60 years. The oldest hydropower project in China has already been operating for over 100 years. Therefore, hydropower projects relatively conservative depreciation policies than the actual lifespan could provide

41、additional cash returns in the long run.Unlike wind and solar farm operators, we expect limited change in working capital as the hydropower business is generally a stable cash-generating business with no delay in payment of hydropower tariff from grids and end-users, in our view.Figure 7: Depreciati

42、on of major hydropower companies (2014)Yalong River HydroPowerYangtze PowerAvg. depreciation years42.529.0Unit depreciation cost (Rmb/KWh)0.0860.053Source: Company dataFigure 8: Hydropower projects constructed after 2014 have better investment/return ratiosOn-grid tariff (Rmb/KWh)0.400.350.300.250.2

43、01.001.502.002.503.003.50Unit capex (Rmb/KWh)Constructed after 2014Constructed between 2009-2014Constructed before 2009Source: Company data, UBS-S estimatesHydropower is most efficient and economical for energy storage and peak load regulationIn Chinas current power supply structure, hydropower acco

44、unts for only 17% of total capacity as of 2020, compared with the 57% for thermal power. Due to carbon emissions, we expect coal-fired power to be gradually phased out, and renewables expanded significantly to replace it.Power demand is mostly concentrated in the eight daytime working hours and the

45、summer season which has led to a large gap between peak load and trough load. Wind and solar power are intermittent power sources, which are less stable, and need back-up power from reliable energy sources such as coal, nuclear, hydropower and natural gas. Therefore, peak load regulation is required

46、. As coal and gas are not clean and nuclear has potential safety issues, hydropower could be critical to China becoming carbon neutral.Figure 9: Daily power supply breakdown in the US (2020)100%Percent of daily power peak load90%80%70%60%50%40%30%20%10%0%12:002:004:006:008:0010:00 12:002:004:006:008

47、:0010:00 12:00AM AM AMAM AM AMPMPMPMPMPMPMAMGasHydroNuclearThermalWind+SolarSource: International Energy Agency (EIA)Of all power sources, hydropower is the most efficient and economical for peak load regulation. This can be achieved mainly through reservoir capacity and pumped-storage hydropower. I

48、n comparison, the peak load regulation by thermal and nuclear power is neither economical nor efficient. Currently, the dominant peak load regulation power source is in hydropower and gas power.Potential installation upsideFollowing an installation boom before 2015, hydropower new installation has b

49、een growing at a milder pace. During the 13th FYP (2016-20), annual hydropower capacity addition was only 10GW, lower than the 19GW annual addition in the 12th FYP (2011-15). Accumulated capacity was 370GW by end-2020, lower than in the 13th FYP target of 380GW by 2020.However, we expect hydropower

50、development to reaccelerate over the 14th FYP, driven by Chinas ambitious carbon-neutral goal and substantial undeveloped hydropower resources. China Electricity Council (CEC) forecasts non-fossil fuel capacity to reach 48% of total capacity, with hydropower reaching 487GW, nuclear 89GW, wind 350GW,

51、 solar 340GW and coal-fired power 1250GW. Given hydropower capacity of 370GW by end-2020, we estimate this could imply 23GW pa capacity addition in 2021-25, which would outpace the 10GW pa addition over the 13th FYP, and also higher than the 19GW pa capacity addition over the 12th FYP.Our capacity f

52、orecasts: We forecast 17.6GW pa capacity addition in the 14th FYP (2021-25) and accumulated capacity to reach 458GW by end-2025. We expect an installation boom in 2021-22, with 23GW per annum capacity addition, mainly driven by the commissioning of large hydropower projects such as Wudongde and Baih

53、etan for CYPC, and Lianghekou and Yangfanggou for SDIC and Chuantou. We forecast 14GW pa addition in 2023-25, with slower addition of conventional hydropower projects but faster growth of pumped-storage hydropower.Figure 10: Annual hydropower capacity addition in ChinaFigure 11: Accumulated capacity

54、 for conventionalhydropower and pumped-storage hydropowerMW35,00030,00025,00020,00015,00010,0005,000-250%200%150%100%50%0%-50%200420052006200720082009201020112012201320142015201620172018201920202021E2022E2023E2024E2025E-100%MW500,000450,000400,000350,000300,000250,000200,000Annual total hydro instal

55、lationYoY growth (RHS)Conventional hydropowerPumped-storage hydropowerSource: China Electricity Council, UBS-S estimatesSource: China Electricity Council, UBS-S estimatesContributors to this would largely from: 1) accelerated expansion of conventional hydropower plants; and 2) rapid ramp up of pumpe

56、d-storage hydropower plants.Substantial exploitable capacity for conventional hydropowerWe think there is substantial undeveloped hydropower capacity in China that should support hydropower generators long-term growth. According to national hydropower resources statics, Chinas theoretical/technical

57、exploitable capacity is 694/542GW. At the end of 2020, Chinas installed hydropower capacity was 370GW, accounting for 68% of technical exploitable capacity.Hence, we estimate there could be over 170GW hydropower capacity growth potential. In terms of power generation volume, the power generated by i

58、nstalled hydropower capacity was 1,355bn kWh in 2020, accounting for 55% of technical exploitable volume.Figure 12: Domestic hydropower explored capacity vs technical exploitable capacityGWkWh bn5422,4703701,355600300050025004002000300150020010001005000Installed capacity (GW)0Annual power generation

59、 (kWh bn)Current capacity/power generation (2020)Technical exploitable capacity/power generationSource: Ministry of Water ResourcesIn the 14th Five-Year Plan (2021-25), the key focus is to continue developing Jinsha River downstream and Yalong River and Dadu River midstream. The construction cycle o

60、f hydropower plants is long at 5-10 years. Currently, there are around 49GW large projects under construction and of these, we expect 41GW capacity to commence operations before 2025 and 8GW to remain under construction. This would be much larger than in the 13th FYP, where there were only 15.5GW la