Five major power industry

With the convening of the two sessions in 2014, the heating industry has frequently blown warm winds. In terms of specific aspects, there are five major advantages:

First, the issue of water and electricity price reform was broken, and the annual energy work guidance was issued. The Development and Reform Commission issued a notice to improve the mechanism for the formation of hydropower prices, marking a substantial step in the reform of the hydropower electricity price formation mechanism that reduces government intervention and enhancing the role of the market; at the same time, the annual energy work guidance was issued, and special supervision of energy-saving and emission-reduction prices started. Set the tone for the future development of the power sector.

Second, the Ministry of Finance website recently issued the “Notice on Value-Added Tax Policies for Large-scale Hydropower Enterprises” to clarify the preferential VAT policies for large hydropower enterprises. This is another major benefit for the power industry this year, following the breaking of the hydropower price reform.

Thirdly, Lu Qizhou, member of the National Committee of the Chinese People's Political Consultative Conference and general manager of China Power Investment Corporation, disclosed that CPI will start mixed ownership reform this year and will allow private equity participation in some of CPI's subsidiaries and construction projects. The proportion of private equity participation will reach three-thirds one. This is the first large-scale state-owned enterprise in the power industry that has explicitly stated that it has initiated a mixed ownership reform.

Fourth, on March 12, the Bohai Bay thermal coal price closed at RMB 538/ton, which was RMB 10/ton lower than the previous reporting period. The Bohai Bohai thermal coal price has dropped for 9 consecutive weeks. For thermal power companies, this is expected to ease the cost pressure from the downstream, and the gross margin level will continue to increase in the future.

Fifth, it is reported that the pilot scheme for preferential shares pilots is expected to be introduced soon. It is expected that the official issuance will be implemented in the second half of the year. The relevant companies are ready to start the issuance of the pilot management measures. Analysts expect that companies in the banking and power sectors are most likely to benefit.