NEWS

2021-1-6 13:35:09

Electrical equipment industry: UHV remains the investment focus in 2016

     State Grid Corporation of China held its 2016 work conference, planning to invest 439 billion yuan. On January 16, State Grid Corporation held the 2016 work conference to deploy the investment and construction plan for 2016. In 2016, State Grid plans to invest 439 billion yuan in power grid construction, which is 1.31 billion yuan less than the actual investment of 452.1 billion yuan in 2015. Considering that the actual investment in recent years has been higher than the planned investment, we believe that the actual investment in 2016 can reach around 46 billion yuan.

    Ultra-high voltage (UHV) is steadily advancing. From 2016 to 2017, 10 UHV projects will be successively put into operation, with large-scale profit realization from UHV projects leading to rapid growth in the performance of related companies. In 2015, a total of 6 UHV projects were approved ("four DC and two AC"). If in 2016, 13 UHV projects could be approved ("five AC and eight DC"), UHV still has significant potential for rapid growth in the future.

    The Energy Internet is gradually growing. Since 2015, State Grid has proposed the "Global Energy Internet" plan, relying on the Belt and Road Initiative and the global internet to bring domestic UHV and other power equipment products to foreign markets, achieving sustainable growth.

    The distribution network will be one of the key projects. At the beginning of 2015, the State Grid planned to invest 92.65 billion yuan in upgrading rural power grid infrastructure; in the middle of 2015, the State Grid added another 67.38 billion yuan investment for the renovation and upgrade of the rural power grid. The total investment for this rural power grid upgrade reached 160 billion yuan, and the project is expected to be fully completed by July 2016. We expect that the distribution network investment in 2016 will still be a focus of the State Grid.

    The smart grid remains stable. Judging from the number of smart meters installed, the intelligence on the power consumption side has basically stabilized; about 10% of substations are smart substations, and there is still significant room for future development; distribution automation has been completed in the urban areas of 30 key cities and core areas of 30 non-key cities, and it is expected to be steadily expanded nationwide in the future.

    The proportion of UHV (Ultra High Voltage) and distribution network investments will increase. During the "12th Five-Year Plan" period, the State Grid cumulatively invested 1.8 trillion yuan. It is estimated that during the "13th Five-Year Plan" period, the total investment in the State Grid will exceed 2.2 trillion yuan, an increase of more than 20% year-on-year. It is expected that UHV and distribution networks will be key projects. The State Grid plans that with the acceleration of the subsequent "five AC eight DC" UHV projects, new UHV grid investments before 2020 will reach 450 billion yuan; through the construction of the global energy internet, China's total investment in UHV AC and DC projects from 2016 to 2030 will reach 2.2 trillion yuan. In terms of the distribution network, the "Action Plan for Distribution Network Construction and Renovation (2015-2020)" mentioned: from 2015 to 2020, the investment in the construction and renovation of the distribution network will not be less than 2 trillion yuan, and it is expected that during the "13th Five-Year Plan" period, the proportion of distribution network investment will continue to rise.

    In the coming years, UHV and distribution networks will still be the main directions of power grid investment. The performance of UHV companies is expected to grow rapidly in 2016-2017, and we recommend paying close attention to Pinggao Electric, China XD Electric, etc. In 2015, the tender volume of distribution equipment by the State Grid increased by 70% year-on-year, and most of it is expected to contribute profits in 2016. Meanwhile, the tendering for distribution has changed from pure equipment tendering to distribution transformer district tendering, which is expected to improve the situation of low-price competition in the industry, increase the market share of advantageous enterprises, and significantly increase the value of winning bids year-on-year.