Five Major Power Companies Plan to Strengthen Multi-Energy Asset Portfolio Complementarity

Huaneng Power International,Inc. (600011.SH), Datang International Power Generation Co.,Ltd. (601991.SH), Huadian Power International Corporation Limited (600027.SH), Gd Power Development Co.,Ltd. (600795.SH), and CHINA POWER (02380.HK) have recently released their semi-annual reports. The five companies achieved a combined net profit attributable to shareholders of 24.267 billion yuan, exceeding the total net profit of the same period in 2024 and setting a new high for semi-annual net profits disclosed since 2016.

Among them, Huaneng Power International,Inc. and Datang International Power Generation Co.,Ltd. saw their net profit attributable to shareholders increase by 24.26% and 47.25% respectively in the first half, reaching 9.262 billion yuan and 4.579 billion yuan, with both profit levels and growth rates leading the five major power companies. Huadian Power International Corporation Limited, Gd Power Development Co.,Ltd., and CHINA POWER followed with 3.904 billion yuan, 3.687 billion yuan, and 2.835 billion yuan respectively.

In terms of growth rate, among the five companies, only Gd Power Development Co.,Ltd. saw a year-on-year decline in net profit attributable to shareholders in the first half. The company explained that this was due to the impact of last year's disposal of Guodian Jiantou Inner Mongolia Energy Company. Excluding this non-recurring item, the company's adjusted net profit attributable to shareholders increased by over 56% year-on-year to 3.41 billion yuan. This means all five major power state-owned enterprises achieved net profit growth in the first half.

The decline in fuel costs, primarily coal, was the main reason for the collective growth in net profit for these companies. From a market perspective, China's thermal coal market operated weakly in the first half, with coal price centers falling back. The average transaction price of 5,500-calorie thermal coal at Qinhuangdao Port was approximately 685 yuan per ton, down about 22.2% year-on-year.

Affected by this, Huadian Power International Corporation Limited's unit price of standard coal entering furnaces was 850.74 yuan per ton in the first half, down 12.98% year-on-year. The comprehensive standard coal unit prices for Gd Power Development Co.,Ltd. and Huaneng Power International,Inc. were 831.48 yuan per ton and 917.05 yuan per ton respectively, down 9.5% and 9.2% year-on-year.

Therefore, companies with higher proportions of coal-fired power installed capacity, such as Huaneng Power International,Inc. and Datang International Power Generation Co.,Ltd., showed outstanding net profit performance in the first half. Huaneng Power International,Inc.'s coal power segment net profit increased 84% year-on-year to 7.31 billion yuan, while Datang International Power Generation Co.,Ltd.'s coal power segment increased nearly 109% year-on-year to 3.148 billion yuan.

However, when considering operating revenue, the five major power state-owned enterprises saw profit increases without revenue growth, with Huadian Power International Corporation Limited, Gd Power Development Co.,Ltd., and CHINA POWER seeing operating revenue decline by nearly 10% year-on-year in the first half.

"The company's operating revenue decrease was mainly affected by reduced power generation and declining electricity prices," stated Huadian Power International Corporation Limited in its semi-annual report.

All five major power companies emphasized in their semi-annual reports the implementation of market-oriented electricity pricing policies for renewable energy, leading to a market situation of "volume and price both declining," with companies experiencing collective declines in electricity prices and grid-connected power generation in the first half, affecting overall operating revenue.

For example, Gd Power Development Co.,Ltd. highlighted electricity market risks in its semi-annual report, noting that with the full rollout of electricity spot markets, electricity prices are determined by real-time market supply and demand, increasing volatility and uncertainty. Meanwhile, after renewable energy fully enters the market, although mechanism electricity prices can provide a floor for renewable energy returns, the guarantee level remains uncertain, electricity prices show a downward trend, and market competition is increasingly fierce.

CHINA POWER also pointed out that due to other power sources flooding into the spot market, lowering market transaction electricity prices, and simultaneously affecting the functional shift of coal power toward frequency regulation and peak shaving within the power system, the company's coal power electricity sales and revenue declined year-on-year.

However, the decline in grid electricity prices in the first half was less than the coal price decline, creating some profit space for companies. For example, Huaneng Power International,Inc.'s average grid settlement electricity price for operating power plants in mainland China declined 2.7% year-on-year to 485.27 yuan per megawatt-hour in the first half, lower than the 9.2% decline in standard coal unit price entering furnaces; Huadian Power International Corporation Limited's average grid settlement electricity price was 516.8 yuan per megawatt-hour, down 1.44% year-on-year, also lower than the company's 12.98% decline in standard coal unit price entering furnaces.

Multiple companies also mentioned that capacity electricity prices (determined by calculating a certain proportion of fixed cost recovery for coal-fired power units) and auxiliary services provided stable comprehensive electricity prices, also playing a regulatory role on market transaction electricity prices.

"After coal power received capacity electricity pricing, although the electricity volume of coal-fired units is declining, their profitability and loss-reduction levels have improved significantly," noted company management at Huaneng Power International,Inc.'s first-half performance briefing, pointing out that the capacity electricity price mechanism for coal power units gives coal power a relatively fixed profit structure.

Considering the comprehensive power generation structure combining wind power, photovoltaic, gas turbines, and hydropower, large power generation enterprises can achieve mutual assistance and benefits among various power sources in electricity spot markets, enhancing their profitability or loss-reduction capabilities.

Facing the market environment of renewable energy fully entering the market and accelerated advancement of electricity spot markets, and how to respond to predictable risks of declining electricity volume and prices, CHINA POWER stated it will flexibly adjust electricity trading strategies, coordinate electricity medium and long-term trading with spot market trading connections, ensuring settlement electricity prices maintain a leading position in the region; while deepening asset management, implementing the positioning of multi-energy asset portfolio complementarity combining hydro, wind, solar, and thermal power, and leveraging synergies between renewable energy business and clean thermal power business.

Gd Power Development Co.,Ltd. also stated it will emphasize the cultivation and selection of traders, explore the use of big data, AI and other technological means to enhance market analysis and forecasting capabilities, and focus on the core tasks of competing for electricity volume and stabilizing electricity prices, studying electricity market trends and strengthening forward-looking and scientific forecasting of grid loads.