BOCOM: WIND SECTOR gets ‘Outperform’ call on Beijing handouts, potential
Bocom International said that consistent subsidies from Mainland China’s central government in Beijing strengthen the country’s wind power sector competitiveness, with direct government support for both wind and solar in particular.
It also believes that new surcharges on wind power are keeping pace with other forms of energy.
In addition, within three years, wind power will be a serious competitor to thermal on a cost basis.
The on-grid tariff and sales tariff for thermal power were recently raised.
After three hikes this year, the on-grid tariff for thermal power has reached approximately RMB0.44/kWh.
Meanwhile, the on-grid tariff for onshore wind power is RMB0.51-0.61/kWh.
“The low end of this range is now the same as some of the higher thermal power tariffs. We reiterate our view that the cost of wind power will match that of thermal power by 2015.
“With energy conservation and emission reduction being key goals in the 12th Five-year Plan period, we are optimistic on wind power's position in China's electricity mix and environmental efforts,” Bocom added.
The brokerage is maintaining its "Outperform" call on China’s wind power sector.
Its top picks are Longyuan Power (HK: 916) and China Datang Corp Renewables Power (HK: 1798), both of which are rated "Buy."
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BOCOM: COAL SECTOR ‘Outperform’ call reiterated, Xinjiang in spotlight
Xinjiang Hami’s annual coal output has the potential to produce 100 mln tonnes after entering the exploration phase, equivalent to Xinjiang Province’s total coal production in 2010, said Bocom International.
As of the end of November, Xinjiang Hami Santanghu Coal Field -- located in the country’s largest but rather remote province -- had reported coal resources of 55 bln tonnes at the shallow layer (less than one km) and 120 bln tonnes at depths of less than two km. It is estimated that the coal field will enter an expansion phase in 2012.
Based on the second national coal field prediction, Mainland China has total coal resources of 5.06 trillion tonnes, of which nearly one third, or 1.621 trillion tonnes, are in Xinjiang.
“There is potential for large-scale coal exploration in Xinjiang. The region’s coal resources are concentrated in Hami, Zhundong, Yili and Kubai,” Bocom said.
The coal output of Xinjiang reached 110 mln tonnes in 2010, with the government of the autonomous region planning to increase its coal production capacity to 430 mln tonnes by 2015 and over one billion tonnes by 2020.
Due to insufficient rail cargo networks in the region, demand will continue to outstrip supply in China’s coal sector, which is good news for collieries as this will maintain strong selling price inflation.
“Even if Xinjiang’s capacity exceeds 400 mln tonnes in 2015, whether utilization can reach a high level remains uncertain due to transportation bottlenecks. Supply tightness will remain the theme of the Chinese coal market over the next three years,” Bocom said.
The brokerage is reiterating its "Outperform" sector rating.
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