Power stocks experienced a broad decline. At the time of writing, Huadian Power International (01071) dropped 6.31% to HK$4.16, China Longyuan Power (00916) fell 4.01% to HK$7.43, Huaneng Power International (00902) decreased 2.64% to HK$5.91, and China Resources Power (00836) declined 2.2% to HK$18.66. On the news front, as of March 27, portside coal prices increased by RMB 26 per ton week-on-week to RMB 761 per ton, reaching a new high for the year. Regarding power plant inventories, stockpiles at the six major power plants decreased by 391,000 tons week-on-week to 12.75 million tons, a reduction of 775,000 tons compared to the same period last year. While daily coal consumption has risen, procurement has remained limited to essential needs, leading to a significant drawdown in power plant inventories. Coal remains the primary variable cost for thermal power enterprises; a substantial increase in coal prices would directly impact their profitability. One securities firm noted that concerning electricity prices, expectations for reductions in local long-term contract prices are already fully reflected in the market. The recent recovery in coal prices is seen as beneficial for the rebound of monthly and spot electricity prices. On the supply and demand front, declining growth rates in thermal and renewable power capacity installations, coupled with consistently stronger-than-expected AI-related demand, may alleviate previous pessimistic expectations of a power supply glut. Reforms in the power system are accelerating, with the expansion of spot trading, the implementation of capacity pricing and ancillary services, and green certificates improving the integration of wind and solar power. Regarding capital expenditure, the peak investment period has passed, leading to improved free cash flow and heightened expectations for dividend payouts.
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