Power sector stocks experienced a collective downturn. CHINA LONGYUAN (00916) fell 4.47% to HK$5.77. HUANENG POWER (00902) declined 2.97% to HK$6.86. CHINA RES POWER (00836) dropped 2.58% to HK$19.29. HUADIAN POWER (01071) decreased 2.25% to HK$4.35.
The equatorial central-eastern Pacific entered an El Niño state in May this year. Analysis suggests that persistent extreme heat and drought will likely sustain high growth rates in residential and industrial cooling electricity loads during the peak summer demand period, widening the peak-to-valley load differentials in regional power grids. Under expectations of tight supply, the current elevated coal prices, combined with the summer peak electricity consumption period, may further push up trading prices in the spot power market. This scenario is set to increase the temporary pressure on thermal power generators to ensure peak supply while simultaneously intensifying the challenge of cost control.
Furthermore, fluctuations in precipitation are expected to lead to divergent water inflows across different river basins. While inflows may be lower than average in some provinces and the middle reaches of the Yangtze River, the lower Yangtze and Pearl River basins are anticipated to experience above-average inflows. Starting from the second quarter, the energy storage indicators for large and medium-sized hydropower stations in southwestern China, along with high-quality water inflows, are expected to improve significantly. This development further strengthens the earnings certainty for the hydropower sector, characterized by simultaneous increases in volume and price, and creates positive synergy with thermal power's role in ensuring peak supply capacity.
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