1、Buy,Hold,Hold,Hold,Hold,Hold,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Buy,Sell,Sell,Deutsche BankMarkets Research,AsiaChinaUtilitiesUtilities,IndustrydbAccess ChinaConference,Date22 January 2013Industry UpdateEric Cheng, CFAMichael Tong, CFA,Utilities/Alternative Energy highlights,Res
2、earch Analyst(+852) 2203 6167,Research Analyst(+852) 2203 6202, eric-Kai-Ting Wong, CFA,The dbAccess China Conference 2013, held on 14-15 January in Beijing, wasattended by more than 660 investors, 112 corporates, and 31 industry andmacro experts, of which ten corporate and two industry experts were
3、 frompower, utility and alternative energy. We also hosted a natural gas and LNGtour on 16-17 January in Beijing and the Jiangsu province. This documenthighlights our key takeaways from the conference and the field trip.Key takeawaysBeijing Enterprise: 2012 transmission volume slightly below expecta
4、tiondue to bottlenecks, which suggests c.2-3% downside to our 2012Eearnings, but vehicle CNG/LNG usage in Beijing presents mid-term upside.BEWG: New sewage treatment capacity addition of 1.8-1.9m tons/day in2012 is marginally below its previous guidance of 2m tons/day. Shareoption issue under way.Da
5、tang Power: Duolun project operating at only 47% utilization in Dec12due to low heat value of coal, but 4Q12 unit fuel cost trend down further.Keqi coal gas project likely to commence in March 2013 at the earliest.ENN Energy: 2012 seems to be on track with 6.3bcm gas sales volumeand 1.1m household c
6、onnections expected. Management will provide2013 guidance in late March. Theres a high chance of an increase inupstream gas tariff in 2013.GCL Poly: Polysilicon plant utilization recently rebounded with spot priceup c.3-4% to US$16/kg since the beginning of 2013. Punitive tariffs onimported polysili
7、con in February 2013 likely to further drive up spot price.Longyuan Power: Management expects grid curtailment rate to declinefrom 15% in 2012 to 10% in 2013, which implies 2013 utilization rate islikely to be higher than our estimate. CDM income likely to decline c.50%in 2013.Shanghai Electric: Man
8、agement holds a relative cautious view on 2013revenue outlook, expecting a largely flat yoy trend. It is targeting neworders of Rmb40bn in 2013 vs Rmb36bin in 2012.,Research Analyst(+852) 2203 6235kai-Companies FeaturedDatang Intl Power (0991.HK),HKD3.16China Resources Power(0836.HK),HKD19.92Huaneng
9、 Power Intl (0902.HK),HKD7.08Huadian Power (1071.HK),HKD2.78China Power Intl (2380.HK),HKD2.55Towngas China (1083.HK),HKD6.49Beijing Enterprises (0392.HK),HKD52.30ENN Energy (2688.HK),HKD36.05China Gas Holdings (0384.HK),HKD6.91Kunlun Energy (0135.HK),HKD17.12CR Gas (1193.HK),HKD16.80Guangdong Inves
10、tment(0270.HK),HKD6.30China Everbright Intl (0257.HK),HKD4.43BEWG (0371.HK),HKD2.01Dongfang Electric (1072.HK),HKD15.42Shanghai Electric (2727.HK),HKD3.48Harbin Electric (1133.HK),HKD7.38GCL-Poly (3800.HK),HKD2.05Longyuan Power (0916.HK),HKD6.40Huaneng Renewables (0958.HK),HKD1.69Datang Renewable (1
11、798.HK),HKD1.22Goldwind Sci & Tech (2208.HK),HKD3.96China High Speed Trans(0658.HK),HKD3.48,China Nuclear Energy Association: Mr. Xu believes nuclear new projectstarts are likely to reaccelerate after 2015 and the 30GW capacityunder-construction target for 2020 is the same as the previous target, i.
12、e. prior tothe Fukushima accident.China Wind Energy Association: Mr. Shi believes RPS is still being plannedand could be implemented this year. He also believes the delay in theapproval of UHV AC lines is largely due to political reasons.Natural gas and LNG tour: We see upside risks from capacity ex
13、pansion ofthe Shannxi-Beijing Pipelines as the planned capacity of the No.4 Pipelinemay reach 30bcm p.a. vs. the expectation of 10-15bcm p.a._Deutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors shouldbe aware that the
14、firm may have a conflict of interest that could affect the objectivity of this report. Investors shouldconsider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.,22 January 2013UtilitiesdbAcc
15、ess China ConferenceTable Of ContentsCompany takeaways .3Beijing Enterprises (0392.HK, TP HKD 65.00, Buy, HKD 51.10) . 3BEWG (0371.HK, TP HKD 2.00, Buy, HKD 1.99). 3Datang Intl Power (0991.HK, TP HKD 3.50, Buy, HKD 2.98) . 4ENN Energy (2688.HK, TP HKD 35.20, Hold, HKD 34.15) . 5GCL-Poly (3800.HK, TP
16、 HKD 1.20, Hold, HKD 2.03). 6Longyuan Power (0916.HK, TP HKD 7.00, Buy, HKD 6.37). 6Shanghai Electric (2727.HK, TP HKD 4.70, Buy, HKD 3.74) . 7Industry Experts .8Utilities: China nuclear power . 8Utilities: China wind power . 9China Gas Utilities Tour .11Natural gas and LNG tour takeaways . 11Kunlun
17、 / Beijing Enterprises: PetroChina Beijing Gas Pipeline Co. . 12Kunlun: Jiangsu LNG receiving terminal and refueling station . 14Beijing Enterprises: LNG storage and refueling station facilities. 16Beijing Jingneng (0579.HK): Taiyanggong gas-fired co-generation . 17Valuation and risks . 19,Page 2,De
18、utsche Bank AG/Hong Kong,22 January 2013UtilitiesdbAccess China ConferenceCompany takeawaysBeijing Enterprises (0392.HK, TP HKD 65.00, Buy, HKD 51.10)Eric Cheng, CFA, eric-, (+852) 2203 62022012E: gas distribution volume likely above but transmission volume may missBeijing Enterprises (BJE) attended
19、 our Access China conference 2013. Overall, webelieve the downstream gas distribution is likely to reach 7.9bcm in 2012E (+23% yoy,vs. +15-20% yoy guidance earlier last year). However, we note that there was sometransmission bottleneck for the gas transmission business in December 2012. This maymean
20、 the total transmission volume will be slightly below the market expectation of24bcm and suggests c.2-3% downside to our 2012E earnings.Gas distribution business: faster growth in the CNG/LNG consumption volumeWe believe gas distribution volume in Beijing could be 2% above our expectation,reaching 7
21、.9bcm in 2012E (+22% yoy, largely due to a colder winter in Beijing vs. lastyear). This is mainly driven by a +25% yoy consumption by the co-generation usersand +15% yoy growth in the heating sector. The 15bcm gas sales target in 2015 looksto be on-track so far with gas consumption from gas-fired po
22、wer plants andreplacement of coal-heating furnace by gas remain the key drivers. Vehicle CNG/LNGusage in Beijing will also present another growth angle with consumption volume likelyto reach 1.5bcm by 2015. Gas sales in satellite cities surround Beijing will also developbut it may take two years bef
23、ore the scale benefit can be realized.Potential miss on gas transmission volume may marginally weight on earningsThere seems to have some slowdown in the gas transmission volume growth inDecember 2012 due to transmission bottleneck. As a result, the gas transmissionvolume growth in 2012 would likely
24、 be 2-3ppts below earlier guidance of +20% yoy.This would translate into a c.25% yoy earnings growth from the transmission business(vs. 30% yoy growth in our current estimates).Update on capex, Yanjing Brewery and environmental businessWe expect growth from the Yanjing Brewery business to be largely
25、 flat yoy in 2012E,which is mainly attributable to a growth slowdown in the brewery industry. We seeexpansion for Yanjing to contract as its capex has scaled down to c.Rmb1.6bn (fromRmb2.6bn originally). However, capex for BJE would likely stay at c.Rmb5-6bn p.a. inthe next 2-3 years as we expect mo
26、re investments would be made in the environmentalwaste-to-energy business (c.Rmb2bn in 2013E). The parentcos investment in ChinaGas Holdings (0384.HK) is unlikely to be short term (though it shows significant gain ona marked-to-market basis), and we may see the parentco trying to seek some businessc
27、ooperation with China Gas going forward.BEWG (0371.HK, TP HKD 2.00, Buy, HKD 1.99)Kai-Ting Wong, CFA, kai-, (+852) 2203 62352012 project addition marginally below earlier guidance: Management guided that itsuccessfully added 1.8-1.9m tons/day of treatment capacity in 2012, marginally missingits prev
28、ious guidance of 2m tons/day. Among the new projects, 30% are BOT/Greenfieldprojects while the remainder are TOT projects that were acquired from the governmentand third parties. Including the asset injection, BEWG added 3m tons/day of new,Deutsche Bank AG/Hong Kong,Page 3,22 January 2013Utilitiesdb
29、Access China Conferenceprojects in 2012, bringing its total capacity to 12m tons/day. Management maintains itscapacity expansion target of 2m tons/day in the next few years.Desalination project still under negotiation: Management remains optimistic on theoutlook for the desalination market and plans
30、 to invest significantly (Rmb10bn) in thesector. Currently, it has a 50,000 tons/day desalination project in Hebei province that isyielding an equity IRR of c.10%. Management said it had received approval from theBeijing government to invest in a large-scale desalination project that will have aproc
31、essing capacity of 1m tons/day, with expansion potential to 3m tons/day. Theproject will be situated in the same location as its current desalination plant and thedesalinated water will be supplied to Beijing. Management said the previous delay inreceiving NDRC approval for the project was due to a
32、conflict of interest between the“South to North” water diversion project and the desalination project. Based onindependent research, management said the cost of water in Beijing from the “south tonorth” diversion project will be Rmb14-15/t, significantly more expensive than thedesalination project o
33、f Rmb8-9/t.No placement plans unless good project opportunities arise: Based on its 2m tons/dayof capacity expansion and Rmb2bn of BT project investment, management said thecompany is unlikely to raise additional capital from the market. Nonetheless, should thecompany come across large-value accreti
34、ve projects, it may consider a shareplacement. Potential projects include Rmb100bn water resource renovation projectslaid out by the Beijing government in the 12th Five Year Plan and the desalinationproject.Share options issue underway: The company has received approval from its parentcompany to iss
35、ue share options to senior management. The share option plan is likelyto be executed this year.No timeline on CDB cooperation yet: BEWG is still finalizing the details on setting upthe water fund with China Development Bank (CDB). Based on the preliminary plan, theinitial fund size will be US500m, w
36、ith BEWG injecting some of its assets andcontributing cash. The plan will need to go through an EGM given the asset transfer toa related party.Datang Intl Power (0991.HK, TP HKD 3.50, Buy, HKD 2.98)Michael Tong, CFA, , (+852) 2203 6167Duolun project yet to commence official operationDatangs Duolun c
37、oal chemistry project has yet to reach 70% utilization rate, which isthe condition for the company to announce official operation of the project. Due tolower-than-expected heat value of the coal from its Shenli coal mine, the ramp-upprocess is facing difficulty in entering a smooth operation. In Dec
38、ember 2012, theproject reached 47% utilisation rate, an improvement versus the previous two months,but it has yet to reach the threshold of stable operation. As per the design of itsgasification furnaces, it requires feedback coal to have a heat value of 3,400kcal/g.However, the heat value of the cu
39、rrent batch of coals from Shenli mine is only2,600kcal/g. The company is working to fix the issue by blending the current batch withhigh quality coal and recalibrating the furnace. Hopefully, official operation cancommence in 1H13. In December 2012, it produced 18K tons of polypropolene. Thedelay of
40、 the Duolun project remains the key overhang of this company although itspower business is in full recovery mode on declining coal price.,Page 4,Deutsche Bank AG/Hong Kong,22 January 2013UtilitiesdbAccess China Conference4Q12 coal cost trend down furtherIn line with the overall sector trend, Datangs
41、 unit fuel cost declined further qoq in4Q12. The company is still negotiating with coal producers on the price change of itskey contract coals following the government reform on key contract coal pricing. Thedispute is mainly related to coal transported by railway as seaborne coal is mainly onspot b
42、asis. Currently, the companys coal inventory is around 15 days. Nevertheless, weexpect its blended unit fuel cost to decline yoy in 2013 due to high base in 1-9M12. InDecember, almost all of its thermal plants posted profits on lower coal price and strongpower output.Keqi coal gas project likely to
43、commence in March 2013 at the earliestPhase I of the Keqi coal gas project has been completed and is now waiting forPetroChina to construct the natural gas pipeline before commencing commercialoperation. The pipeline was originally scheduled for completion by end December 2012but was delayed; manage
44、ment expects it to start in March 2013 at the earliest.ENN Energy (2688.HK, TP HKD 35.20, Hold, HKD 34.15)Eric Cheng, CFA, eric-, (+852) 2203 6202Operationally on trackENN Energy attended our Access China Conference 2013. Overall, businessperformance looks to be on-track and vastly within earlier gu
45、idance. We expect gassales volume growth and organic residential connections to come in slightly better than25% yoy and 1.1m households, respectively, while organic commercial and industrialconnections may come in marginally below.Natural gas sales volume looks likely to exceed 6.3bcm in 2012We beli
46、eve ENN would achieve a natural gas sales volume of over 6.3bcm in 2012,slight above its 25% yoy guidance from 5.0bcm in 2011. Organic residentialconnections should also be slightly above 1.1m households (vs. 1.03m households in2011), while organic commercial and industrial connections may just reac
47、h or slightlybelow guidance due to some delay in couple distributed energy projects. We expectmore than 20-25% yoy growth in gas sales in 2013 with little yoy growth in newresidential household additions due to the property housing market slowdown. ENN willprovide detailed guidance for 2013 after it
48、s 2012 annual results in late March.Other updates and issuesOver the next few years the vehicle gas business should continue to be one of themajor focuses for ENN. The business is generally high margin, with a payback period of3-4 years on average. There is a high chance of gas tariff reform taking
49、place in 2013,and we believe the upstream gas tariff increase could be at least Rmb0.3/cm (but thereshould still be a short-term margin squeeze on the residential side due to delayed pass-through). Of the c.Rmb5-6bn cash on-hand, c.Rmb1bn would be used to pay downshort-term debt, c.Rmb2-3bn would be for general working capital needs, and theremaining c.Rmb2bn would be for potential acquisitions. For capex, we expect ENN tospend at least Rmb2.5bn p.a. in the next 2-3 years with new projects likely to be focusmore on commercial and industrial customers.,
