The company issued the “Notice on Inner Mongolia Huomei Hongjun Aluminum Electric Co., Ltd.'s investment in the construction of the 350,000-ton green electric aluminum project in Zahannaoer, Tongliao City (Phase II)”. The 7th board of directors of the company passed the “Proposal on Inner Mongolia Huomei Hongjun Aluminum Electric Co., Ltd.'s investment in the construction of the 350,000-ton green electric aluminum project in Zahannur, Tongliao City (Zalu Phase II)”. The details of the project are as follows:
It is planned to build 350,000 tons of electrolytic aluminum, supporting wind power, and energy storage projects. The second phase of the Zalu project is located in Tongliao City, Inner Mongolia Autonomous Region, close to Huolingol City. It is planned to build 350,000 tons of electrolytic aluminum, supporting the construction of a 650,000 kilowatt wind power project, a 100,000 kilowatt 2-hour electrochemical energy storage project, and a 38 kilometer 220 kV transmission and transformation project. The implementation will proceed according to the integrated source network load storage model.
Electrolytic aluminum project technology: 500 kiloampere pre-baked anode electrolyzer and supporting technology. The design raw aluminum production capacity is 355,323 tons/year. The main construction includes a 500 kiloampere electrolysis series (264 electrolyzers), an anode assembly system, a flue gas purification system, a 220kV power distribution device, a rectifier system (8 rectifier units), etc. The project selected the most advanced energy-saving 500 kiloamp pre-baked anode electrolyzer in China and its supporting technology. The comprehensive AC consumption of aluminum liquid is less than 1,3088 kWh/ton of aluminum, and the unit consumption of alumina is less than 1920 kg/ton of aluminum.
Feasible analysis of the “Aluminum Phase II” project: static investment of about 3 billion yuan, static investment of about 8536 yuan per ton of aluminum; dynamic investment of about 3.1 billion yuan, dynamic investment of about 8,727 yuan per ton of aluminum; total investment of about 3.18 billion yuan. According to the research report, 40% of the project plan is self-funded, and the rest is bank loans. According to estimates, during the commissioning period, the project achieved a total profit of 528 million yuan per year, an internal return on investment and finance of 16.4% (after tax), and a payback period of 7.1 years; ROE = 30.6%.
Feasibility analysis of the “integrated source grid load storage” project: the total investment of the integrated source grid load storage project is about 6.72 billion yuan, and the total investment of the power grid portion is about 3.62 billion yuan. Of this, wind power is 650,000 kilowatts, and the number of hours used is about 3,387 hours. The total investment and financial internal rate of return for the integrated source network cargo storage project is 8.1% (after tax), the internal return on capital finance is 15.5%, and the payback period is 7.5 years.
After the “Za Aluminum Phase II” is put into operation, the company will have a production capacity of 1.21 million tons of electrolytic aluminum. It is committed to improving the quality, efficiency and rapid development of the company's Huolin River Xunhua Economic and Industrial Chain.
After the completion of Phase II and supporting projects, the company will form a circular economy industrial cluster with 1.21 million tons of electrolytic aluminum production capacity, 1.8 million kilowatts of thermal power installations, 1.7 million kilowatts of new energy installations, 100,000 kilowatts of energy storage for 2 hours, and green electricity (wind) consumption accounting for more than 40%, achieving the green and high-quality development of the Huolin River circular economy industry chain.
In 2017, four departments implemented total electrolytic aluminum production capacity control, which dynamically formed a “ceiling” of 45 million tons/year of compliant electrolytic aluminum production capacity in China. Combined with the primary market transaction value of electrolytic aluminum in the past 2 years, the target market value of 350,000 tons of electrolytic aluminum for the Phase II project is about 2.5 billion yuan.
The power cost advantage is outstanding. The comprehensive electricity price for Phase II of Zalu Phase II is 0.393 yuan/kilowatt-hour (tax included), which is nearly 1 point lower than the comprehensive electricity price of 0.4016 yuan/kilowatt-hour (tax included) in the 2024 budget of 860,000 tons of electrolytic aluminum in the Huolin River Circular Economy.
The project is equipped with 650,000 kilowatts of wind power and 100,000 kilowatts of two-hour energy storage projects, all connected to the Holinhe Circular Economy Local Area Network to achieve autonomous peak regulation and self-consumption within the local area network, further improving the utilization rate of new energy sources, with green electricity accounting for 79%.
Investment advice. We expect the company's net profit to be 5.6 billion yuan, 6 billion yuan, and 6.5 billion yuan respectively in 2024-2026, and corresponding PE of 8.5, 7.8, and 7.3 billion, respectively.
Risk warning: Asset injections fell short of expectations, aluminum prices fell sharply, and electricity generation fell short of expectations.