Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Huaneng Power International Inc (HUNGF, Financial) reported a net profit attributable to shareholders of RMB7.45 billion, marking an 18.16% increase.
- The company added 3,102.2 megawatts of new capacity, including significant additions in wind and solar power.
- The unit fuel cost decreased by 11.8% year-on-year, reflecting effective cost control measures.
- The performance of the Sahiwal Power Plant in Pakistan reached a record high, with a profit before tax increase of RMB117 million.
- The company is actively pursuing green energy development, with low carbon clean energy accounting for 32.78% of total capacity.
Negative Points
- Consolidated operating revenue decreased by 5.73%, indicating challenges in revenue growth.
- Domestic on-grid power sales decreased by 0.22%, and the average tariff decreased by 3.21%.
- Wind and solar curtailment rates increased, with wind curtailment at 5.56% and solar at 6.05%.
- The profit before tax of Tuas Power in Singapore decreased by RMB1.166 billion due to market conditions.
- The company faces challenges in balancing renewable energy capacity expansion with the high costs of decarbonization and renovation of thermal units.
Q & A Highlights
Q: Could you discuss the wind and solar tariffs and curtailment issues in the first half of the year, and what government policies might address these issues?
A: The wind curtailment was 5.56%, and solar curtailment was 6.05%. The average tariff for wind decreased by 6.04% and solar by 9.77%. The government has released documents to add consumption facilities and ensure curtailment does not exceed 10%.
Q: What is the company's plan for decarbonization of coal units, and how will it balance renewable energy capacity with thermal unit renovations?
A: The company is exploring biomass blending, green ammonia, and CCUS for decarbonization. However, these pathways currently do not offer sound returns, and subsidies may be needed to ensure profitability. The company is reserving projects and will report to authorities as policies develop.
Q: Could you provide details on the company's unit fuel costs for coal and gas units in the second quarter, and explain the increase in standard coal prices?
A: In the second quarter, the blended unit fuel cost was RMB304.6 per megawatt hour, with coal at RMB295.7 and gas at RMB433. The increase in coal prices is attributed to the end of the heating season, which typically lowers coal consumption rates.
Q: What is the company's strategy for life extension of thermal units, and what is the expected CapEx for these projects?
A: The company has 51 units over 25 years old, with 17 approved for life extension. The CapEx is minimal, primarily covering evaluation fees. The life extension does not significantly differ in power generation and profits compared to other units.
Q: How does the company plan to manage the impact of high hydro output on thermal generation, and what measures are in place to maintain profitability?
A: The company will leverage the capacity payment system for stable profits, gain from ancillary services, and capitalize on peak season opportunities. Despite high hydro output dampening thermal generation, these strategies aim to maintain profitability.
Q: Can you explain the increase in R&D and administration expenses in the second quarter, and the performance of Tuas Power?
A: The increase in R&D expenses is due to the implementation of research projects. Tuas Power's high profits are attributed to a tight power market and increased tariffs. The company is optimizing management to maintain stable operations.
Q: What is the company's approach to carbon market trading and dividend payout policy?
A: The company anticipates a shrinking quota and increased pressure in carbon trading. It is actively participating in the market and optimizing management. The dividend payout policy aims for stable returns, with a payout ratio not less than 50%.
Q: How does the company plan to achieve its renewable energy targets amid decreasing returns in the sector?
A: The company is closely monitoring policy changes and remains committed to its renewable targets. It will optimize investment, enhance management, and collaborate with grid companies to ensure efficiency and profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
