Regulatory Changes in China May Short Power Stocks' Gains
Growing demand for electricity has caused shares of China's independent power producers to surge this year. But the short-term outlook for those shares might be dimming.
That isn't because the basic China power story is changing; demand for power will continue to outpace supply, in some places for years. What's making some investors and analysts cautious about the power companies is their belief that this year's good news is already priced in, and they don't know whether next year's news will be good. For them, regulatory risks loom large, as the restructuring of the Chinese power industry is very much a work in progress.
Until more is known about regulatory changes by early 2004, some investors doubt the shares of independent power producers, or IPPs, will rise much more even if China keeps booming.
This year, some IPPs have generated fine returns. Shares in Huaneng Power International, China's biggest IPP, have jumped 77% so far this year. Beijing Datang Power has risen 74% and Huadian Power International has gained 48%.
And initial public offerings by IPPs still garner much attention. Yangtze Electric Power, operator of the Three Gorges Dam -- the world's largest hydropower facility -- soared 45% when trading began Nov. 18 in Shanghai. An IPO earlier this month by China Resources Power also attracted interest, though the shares have stalled at close to the initial price.
The overall picture keeps investors keenly interested in China power. China is the world's second-largest consumer of electricity, after the U.S., and the fastest-growing power market. Electricity demand in the first six months of this year rose 17% from a year earlier. A state agency acknowledges that 17 areas, including coastal provinces around Shanghai, suffer from power shortages.
But China's IPPs also face a tough period of industry restructuring. "Right now, everyone is only looking at the power-shortage issue," says Flavia Cheong, a Singaporefund manager for Aberdeen Asset Management. "A year ago, everyone was looking at tariffs and deregulation. These issues haven't disappeared. The industry structure is still in a state of flux."
Robust demand isn't the only reason parts of China are short of power. Years of government subsidies and bureaucratic mismanagement created an inefficient industry, leaving the nation plagued by power shortages.
China began to reform its power sector in the early 1990s, but the first dramatic changes came last year. The breakup of the State Power Corporation of China, formerly the Ministry of Electric Power, spawned two separate transmission and distribution systems and four nationwide IPPs. Together, the five big IPPs control about half of the country's roughly 360,000 megawatts of capacity.
Analysts and investors will be looking at how the government restructures the tariff system so that competitive market forces, not state policy, determine electricity prices. Release of a government blueprint for a new tariff system is expected within two months.
One major regulatory change that has been unveiled involves the country's northeast region where about 15% of on-grid electricity will be open to competitive bidding early next year. "We will be watching to see where electricity prices stabilize and what kind of returns companies can make at those levels," says Aberdeen's Ms. Cheong.
In addition to regulatory changes, analysts and investors will follow what happens to the price of coal, the IPPs' main fuel source, which could rise. Environmental legislation that took effect in July increased the surcharges power companies pay for harmful emissions. Companies can refit coal-fired generators with equipment to reduce such emissions, but it's expensive.
A question investors face is how much they are willing to pay for companies with strong prospects that face an uncertain regulatory environment.
"Demand is no problem, barring substantial economic slowdown," says David Cheung, investment director at Prudential Asset Management in Hong Kong. "In terms of stock prices, you have to look at valuations. There's a lot of expectations already built into the share prices."
China's IPPs trade at a premium to some Asian power producers, according to Merrill Lynch. It says Huaneng is trading at about 14.8 times 2003 projected earnings and at 14.2 times 2004 earnings. By Merrill's calculations, Thailand's Ratchaburi Electricity Generating has a 2003 price/earnings ratio of 11.1 and a 2004 P/E of 9.5, while the P/E ratios for Malakoff of Malaysia are about 10.4 and 9.9, respectively.
Despite its higher valuation, Huaneng may be a good investment among China's large IPPs, as the cash-rich company has the best potential to grow through smart acquisitions, says Alice Hui, analyst at UBS in Hong Kong. Huaneng has an exclusive agreement with its parent company, which owns many power plants, to have a "first look" at acquisition targets, she says.
Joseph Jacobelli, an analyst at Merrill Lynch, says that given uncertainties facing the industry, a key time will be the first quarter of 2004, when the government introduces wholesale power markets in a limited way. If the State Electricity Regulatory Commission "proves to be able to manage the whole thing in a gradual way and not many people get hurt, then that could be good news for the IPPs," he says.
中国电力股存在监管风险
今年以来，不断上升的电力需求使中国各家独立发电厂商(IPP)的股价大幅飙升，但这些股票近期的前景并不乐观。
这倒不是因为中国电力供需的基本面有什么变化，实际上，电力行业仍将维持供不应求的局面，有些地方甚至还会持续数年。投资者和分析师对电力行业前景感到谨慎的原因是，今年该行业的一些利好消息已被市场所消化，明年能不能有好消息还很难说。他们认为，正在进行的电力行业重组使监管方面的风险日益凸显。
政策方面的变化尚不得而知，一些投资者因此担心，即便中国经济继续高速增长，各家IPP的股价大概难以进一步大幅上涨。
今年中国IPP的股价回报相当可观。比如，中国最大的IPP华能国际电力(Huaneng Power International)今年以来飙升了77%，北京大唐发电(Beijing Datang Power)上涨74%，而华电国际电力(Huadian Power International)也涨了48%。
与此同时，IPP募股上市的活动也吸引了市场的眼球。三峡水利工程的发电实体长江电力(Yangtze Electric Power)本月18日在上海证交所首日交易即大涨45%。华润电力(China Resources Power)本月早些时候的首次公开募股也获得市场的热烈追捧，不过该股目前的股价与其募股价相差不大。
中国经济的总体前景令投资者对电力行业热情高涨。中国是全世界仅次于美国的第二大电力消费市场，且是全球增长最快的市场。
今年前6个月，中国的电力需求较上年同期上升了17%。官方机构承认，全国有17个地区出现了电力短缺，包括上海周边的沿海省份。
但独立发电厂仍面临著行业重组的痛苦阶段。Aberdeen资产管理公司驻新加坡基金经理弗莱维亚?陈(Flavia Cheong)说，现在，大家只注意到短缺问题。而一年前，大家关注的是电价和放松管制的问题。这些问题并未解决。行业重组工作仍在进行之中。
需求强劲并非是导致电力短缺的唯一因素。多年的财政补贴和官僚主义的管理方式使中国电力行业效率极其低下，许多地区深受供电不足之苦。
中国早在90年代初就开始了电力改革，但直到去年电力系统才作出重大调整。电力部(Ministry of Electric Power)继改组为国家电力公司后，去年又实行厂网分离，分拆为发电系统和配电系统两大块，并产生了5家全国性独立发电厂。目前，这5家大型IPP的发电容量在全国约 360,000兆瓦的总发电容量中占据了半壁江山。
分析师和投资者将关注政府如何对电力定价体系进行改革，政府希望由市场力量而不是国家政策决定电价。估计两个月内政府会给出新定价体系的框架。
政府已作出的动作之一是东北地区电网改革。明年初，该地区约15%的电力将实行竞价上网。Aberdeen的陈说，他们将关注电价是否稳定，电厂在那种电价水平上能得到怎样的回报。
除了监管方面的改革外，市场还将关注煤炭价格的上涨势头，煤炭是各IPP的主要发电原料。7月份开始实施的环保法规提高了对发电厂排放有毒废气的附加费收费标准。为减少排放，发电厂可以对设备进行改造，但改造费用很昂贵。
投资者面临的问题是，对这些大有前途但监管方面存在变数的电力公司的股票，他们愿意出多大的价钱呢？
Prudential Asset Management的戴维?张(David Cheung)说，需求方面没有问题，除非中国经济增长显著放缓。至于发电类股的股价，需要具体问题具体分析。目前，该类股的股价已经消化了很多预期性的东西。
据美林公司(Merrill Lynch)提供的数据，中国IPP股价的本益比高于其他亚洲国家的同类股票。比如华能2003年、2004年的预期本益比分别是14.8倍和14.2倍，而根据美林计算的数据，泰国公司Ratchaburi Electricity Generating的数字分别是是11.1倍和9.5倍，而马来西亚公司Malakoff的数字分别是10.4倍和9.9倍。
虽然股价偏贵，但华能在中国大型IPP中仍是较好的投资对象。瑞银(UBS)驻香港的爱丽斯?惠(Alice Hui)说，华能现金基础雄厚，最有能力通过适当的收购活动扩大业务。她说，华能和它的母公司有言在先，如母公司旗下诸多电厂中有待价而沽者，它有优先选择权。
美林的约瑟芬?查克贝里(Joseph Jacobelli)说，对于前景不明的中国电力行业而言，明年第一季度将是最关键的时期，届时政府将在一定限度内放开电力批发市场。他说，如果国家电力监管委员会(State Electricity Regulatory Commission)能逐步推进这一过程，而且不会伤害到很多方面的利益，那么对IPP来说，这应该是个好消息。
