Coal and electricity will run aground next year or reach 400 billion yuan

Recently, some assets of two 125,000 kilowatt cogeneration units of Changji Thermal Power Phase II Company of Xinjiang Huadian Power Co., Ltd. landed on Beijing Property Rights Exchange. Two coal-fired power units, which should have been in service for 30 years, also had to run for only 10 years and become stranded assets. In the context of environmental constraints, energy transformation, overcapacity and deepening reform of electricity market, some experts pointed out that the stranding risk of coal-fired power assets is increasing day by day. The research group of North China Electric Power University pointed out that in the current competitive and external environment, if the unit is decommissioned, idle or turned into debt in advance, the asset value of the remaining life period of the unit will belong to stranded assets.

Take 300,000 kW subcritical unit as an example, assuming that the unit cost is 4500 yuan/kW, the ratio of bank loans to self-financing is 80:20, considering the return of self-financing and repayment of principal and interest on loans, assuming that the long-term loan rate is 6%, the industry benchmark return rate is 8%, and the discount rate is 5.18%. The total value of its 30-year normal operation period projects is about 2.62 billion yuan, of which the capital and return are 650 million yuan, and the loan principal and interest are 1.97 billion yuan. With uncollected principal and return, uncollected principal and interest discount as stranded assets, if run for 10 years, the loss will be 1.14 billion yuan; run for 20 years, the loss will be 500 million yuan.

Regarding the risk of asset stranding, Professor Yuan Jiahai, School of Economics and Management, North China Electric Power University, said that unless active supply-side reform measures were taken, by 2030, coal-fired power assets would be stranded or amounted to 100 billion yuan. Thermal power enterprises are in a predicament of survival. Next year, they will strand assets or reach 400 billion yuan. Under the background of loose coal and electricity supply, some thermal power plants have changed from round-off to "no electricity to be produced", and the profit space of coal and power enterprises is gradually shrinking. In the view of some industry insiders, there are too many stranded assets, resulting in thermal power enterprises into survival dilemma.

The National Power Supply and Demand Situation Analysis and Forecast Report 2018-2019 issued by ITU shows that in 2018, the loss of thermal power enterprises in China is still nearly 50%, and the "survival" mode is still continuing. For enterprises, a large number of assets run aground, resulting in the loss of power plant operation, banks are unwilling to borrow money to turn around, but many come to call for accounts, fearing that the power plant capital chain will break down, some of the "carrying" can only be bankrupt liquidation. While the loss of state-owned assets is accompanied by the reduction of fiscal revenue, a large number of unemployed persons need to be settled. A person in charge of a thermal power enterprise who did not want to be named said. In response, Yuan Jiahai said that whether the supply-side reform measures are positive or not is the key factor to determine the scale of coal-fired stranded assets in the future. Under the background of serious loss and low utilization rate, it is estimated that the grounded assets of coal-fired power units will reach 400 billion yuan by 2020. Yuan Jiahai predicted that if active supply-side reform measures were adopted, the scale of coal-fired power units would be controlled at 1.1 billion kilowatts by 2030, and the grounding value would be reduced to 40 billion yuan by 2030 as the service time prolonged. On the contrary, with the suspension of the construction of units and the continuous construction of new coal-fired power plants during the 13th Five-Year Plan period, the installed capacity of coal-fired power plants will reach 1.2 billion kilowatts by 2030, and the grounded assets will still exceed 100 billion yuan. If the installed capacity is allowed to exceed 1.3 billion kW, the value of stranded assets will still exceed 400 billion yuan.

Yuan Jiahai believes that, considering the elastic change of electricity demand, the difference between grounded assets in the two scenarios will be higher than expected by 2030, and the gap will be further widened if new coal-fired power plants continue to be installed. As far as the current situation of coal and electricity supply and demand is concerned, "it is better not to build more than to build less".

New units increase grounding risk and speed up the break of return expectations

"It is helpless for enterprises to take the initiative to idle or retire units that are still in service, conform to relevant policies and operate well." A person in charge of thermal power enterprises told reporters.

In 2017, the National Development and Reform Commission and the State Energy Administration issued the Opinion on Promoting the Structural Reform of Supply Side to Prevent and Dissolve the Risk of Overcapacity of Coal and Electricity, pointing out that by 2020, the installed capacity of coal and electric power in China will be controlled within 1.1 billion kilowatts.

The Power Industry Operation Profile of January-June 2019 of ITU shows that by the end of June this year, the installed capacity of 6,000 kW and above power plants in China is 1.84 billion kW, of which 1.02 billion kW is coal-fired power generation.

Based on this calculation, during the 13th Five-Year Plan period, the additional space for coal-fired power plants remained 0.8 billion kilowatts, while during the 13th Five-Year Plan period, the total number of coal-fired power plants suspended and delayed in construction reached 150 million kilowatts. "In order to control the installation target within 1.1 billion kilowatt, new installed units will inevitably squeeze out a certain number of active units. At present, most of the new coal-fired units are high-quality units with large capacity and low energy consumption. Small units in local power plants are more likely to run aground. The person in charge of the thermal power enterprise said. At the same time, in June 2017, the Notice on the Orderly Development and Power Utilization Plan issued by the National Development and Reform Commission and the State Energy Administration pointed out that the coal-fired power units approved after the promulgation and implementation of Article 9 no longer arrange generation plans in principle and no longer implement government pricing. Recently, the National Development and Reform Commission (NDRC) has issued a new document, and all the operational power generation schemes have been liberalized. The process of market-oriented transactions has taken another step forward.

The above-mentioned person in charge told reporters that the stricter environmental constraints, the acceleration of electricity market-oriented process and the complete liberalization of power generation plans mean that the expected return of coal-fired power is broken. Even for normal units in service, market returns are limited, and the expected return of coal-fired power enterprises whose assets are stranded is even worse than the actual income. It's a long way off.