But generation remained unimpressive.
National power demand in China rose by 2.5% y-y in 2M15, vs 4.5% y-y in 2M14, mainly owing to flattish industrial demand growth at 1.5% y-y amid domestic economic slowdown.
According to a research note from Nomura, power generation, accordingly, also remained weak at 1.9% y-y in 2M15, vs 5.5% in 2M14.
The largest gains in power output were in Xinjiang, Chongqing, Zhejiang, Fujian, and Guizhou, where Datang has the highest exposure.
Here's more from Nomura:
National average plant utilisation fell by 5.8% y-y in 2M15, mainly dragged down by thermal utilisation due to continuous strong hydropower output and low domestic demand. New power capacity addition was 13.4GW in 2M15, accounting for 1.0% of end-2014 capacity.
In line with our view, seaborne coal price continued its weak trend in 2M15, declining to CNY465/tonne on 16 Mar 2015, the lowest level since Aug 2007. With the supply/demand situation unchanged, we reiterate our view that coal price will remain at a relatively low level in 2015F.
In general, given limited positive catalysts ahead (eg, with only interest rate cuts and decent dividend yield offering support) and several downside factors (eg, on-grid tariff cuts, pressure on utilisation given the emission targets to be met pursuant to the 12th FYP, domestic economic slowdown, and increasing environmental capex resulting from stricter emissions control), we turn more cautious on the China IPP sector, with the recent driving force of power industry reform being only a long-term catalyst.
In addition, we believe that the company’s decent hydropower exposure makes it less sensitive than its peers to coal-fired on-grid tariff cuts, while offering potential upside from hydropower tariff hikes. CPID also has plans for asset injection, which should support its ambitious capacity addition plans.
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