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Shanghai Electric Power Releases 2022 Semi-Annual Report
Shanghai Electric Power released its 2022 semi-annual report. The company achieved operating income of 16.150 billion yuan in 202H, an increase of 12.80% over the previous year; realized net profit of -47 million yuan, a decrease of 106.52% over the previous year; realized net profit of -174 million yuan, a decrease of 125.27% from the previous year; the weighted average ROE was -0.78%, a decrease of 4.73 percentage points over the previous year; and the basic EPS was -0.043 yuan/share. 2022Q2 achieved operating income of 7.769 billion yuan, an increase of 9.18% over the previous year; it achieved net profit of -148 million yuan, a decrease of 133% over the previous year.
Brief review
The epidemic led to a decline in electricity generation in the second quarter, and the increase in market transactions and settlement electricity volume was clearly the company's listing platform under China Power Investment. It is the main integrated energy supplier and largest thermal energy supplier in Shanghai. The power generation business is the company's core business. In January-June 2022, the company completed consolidated calibrated power generation capacity of 27.453 billion kilowatt-hours, a year-on-year decrease of 4.51%; of these, coal, gas, wind power, and photovoltaics generated 177.67, 26.68, 45.59 billion kilowatt-hours, respectively; feed-in capacity was 26.229 billion kilowatt-hours, a year-on-year decrease of 4.61%. In the second quarter alone, the company generated 12.917 billion kilowatt-hours, down 9.1% from the previous year; coal, gas, wind power, and photovoltaics generated 76.21, 13.32, 24.63, and 1.5 billion kilowatt-hours respectively; completed feed-in electricity volume of 12.328 billion kilowatt-hours, down 9.07% from the previous year; the decline in feed-in electricity consumption in the second quarter was mainly due to the impact of the epidemic on electricity consumption in Shanghai.
From January to June 2022, the company's market traded and settled electricity volume of 17.938 billion kilowatt-hours, accounting for 68.4% of the total feed-in electricity volume, up 71.64% from the previous year; the 2022Q2 company's market-traded electricity volume was 7.992 billion kilowatt-hours, accounting for 64.8% of the total feed-in capacity, up 36.9% year on year, mainly due to policies driving all thermal power to enter market-based exchanges. The increase in the amount of electricity settled in the market guarantees the increase in the company's feed-in tariff. The average feed-in tariff price of the company in 202H (tax included) was 0.59 yuan/kWh, an increase of 15.68% over the previous year, mainly due to the rise in thermal power prices.
High coal prices dragged down the performance of thermal power, adding overseas power plants contributed to the incremental revenue of thermal power companies of 202H of 16.150 billion yuan, an increase of 12.80% over the previous year, mainly due to the increase in the company's installed capacity over the same period of the previous year and the year-on-year increase in market-based electricity prices for coal power transactions; operating costs amounted to 13.047 billion yuan, an increase of 24.17% over the previous year, mainly due to the increase in fuel costs and depreciation of new energy equipment due to rising coal prices; the net profit achieved was -47 billion yuan, a decrease of 106.52% over the previous year. The electricity sector was operating at a loss. The 2022Q2 company achieved net profit of 148 million yuan, a decrease of 133% over the previous year and a decrease of 247% from the previous month. The main reason for the month-on-month decline in profit was the increase in losses due to a decrease in power generation in the context of high coal prices.
202H The reduction in electricity generation capacity of the company's consolidated coal at discounted price per unit cost led to operating losses in the coal power sector. The 2022Q2 company achieved net profit of 148 million yuan, a decrease of 133% over the previous year and a decrease of 247% from the previous month. The main reason for the month-on-month decline in profit was the increase in losses due to a decrease in power generation in the context of high coal prices. In 2022H, the company's consolidated discounted coal unit price (tax included) was 1409.73 yuan/ton, an increase of 48.66% over the previous year. Losses were serious in Shanghai. Shanghai Shangdian Caojing Power Co., Ltd., Shanghai Waigaoqiao Power Generation Co., Ltd., and Shanghai Wujing Power Generation Co., Ltd. lost 409/2.18/131 million yuan respectively. Net profit for the same period last year was 0.92/0.42/-78 billion yuan respectively. In terms of fuel costs, we predict that with the gradual implementation of the Changxie coal policy, the company's coal costs are expected to gradually decrease, and losses are expected to narrow; in terms of electricity consumption, as the epidemic recedes and hot weather drives electricity demand and hydropower output, the company's thermal power generation capacity is expected to increase in the third quarter.
2022Q2 has newly put into operation 660,000 kilowatts of Unit 1 of Turkey's Hunutlu Power Plant. The Hunutlu Power Plant is China's largest direct investment project in Turkey. It is also a key project connecting China's “Belt and Road” initiative with Turkey's “Middle Corridor” plan. The total investment is about 1.7 billion US dollars, with a planned total installed capacity of 1,320 megawatts. After the project is put into operation, it can supply 9 billion kilowatts of electricity every year after the project is put into operation. By 2022, Turkey's Hunutlu power plant had a feed-in capacity of 171.1 million kilowatt-hours and achieved net profit of 36 million yuan. As the units are fully connected to the grid in the second half of the year, the company's profits in the thermal power sector are expected to increase.
The share of clean energy installed has steadily increased, and new projects have continued to increase the company's performance. As of the end of June 2022, the company's holding installed capacity was 19790,500 kilowatts, an increase of 16.66% over the previous year, and the installed capacity of renewable energy holdings was 7,7363 million kilowatts, an increase of 28.12% over the previous year. The installed capacity of coal power, gas and electricity, wind power, and photovoltaics was 918.8, 286.62, 379.84, and 3,938 million kilowatts, respectively, accounting for 46.43%, 14.48%, 19.19%, and 19.90% respectively. The increase in installed capacity led to an increase in power generation. In 202H, the company's wind power and photovoltaics generated 45.59 billion kilowatt-hours and 2,459 million kilowatt-hours respectively, up 8.84% and 30.03% year-on-year. 2022Q2's wind power and photovoltaics generated 2,463 million kilowatt-hours and 1.5 billion kilowatt-hours respectively, up 22.90% and 41.64% year-on-year. The company added 35,900 kilowatts of new energy installed in the second quarter. Among them: Taixing Hetai New Energy Co., Ltd. put into operation 34,700 kilowatts of photovoltaics, the Wuyi County Government of Jinhua, Zhejiang put into operation 0.03 million kilowatts of photovoltaics, Wuyi Bach PV put into operation 0.06 million kilowatts, Wuyi Sanxin PV put into operation 0.02 million kilowatts, and the company's new energy generation business continues to expand, which will be the driving force for the company's long-term growth.
The impact of the epidemic has gradually subsided, the steady development of green power has increased profits. Since maintaining the “buy” rating of Q3, the impact of the Shanghai epidemic has gradually subsided. Hot weather has stimulated electricity demand compounded by a decrease in hydropower output, and the space for thermal power output has gradually opened up. With electricity prices remaining high in Q3, with the gradual implementation of the Changxie coal policy, the profitability of the company's thermal power business is expected to recover. The company insists on vigorously developing new energy power supplies and continuously optimizing the company's power supply structure, which is expected to increase the company's profits in the long term. We forecast that the net profit attributable to the company from 2022 to 2024 will be 1.44 billion yuan, 2.9 billion yuan and 3.53 billion yuan respectively, and profits attributable to common shareholders will be 1,309 million yuan, 2.77 billion yuan and 3.398 billion yuan respectively. The corresponding EPS will be 0.5 yuan/share, 1.06 yuan/share, and 1.3 yuan/share, maintaining the “buy” rating.
Risk warning: risk of rising coal prices; risk of new energy installations falling short of expectations; risk of fluctuations in the output of new energy sources.