Nearly 80 billion yuan is planned to build a large project of "wind, solar, fire and storage", what is the income of the Three Gorges Energy?

Interface News

2024-06-28 12:30Interface News official account

The full text is 3017 words, and it takes about 9 minutes to read

Highlight the point

01 Three Gorges Energy plans to invest in the construction of a new energy base project in the central and northern part of Ordos in the Kubuqi Desert of Inner Mongolia, with a dynamic investment of 79.792 billion yuan, and the project integrates "wind, solar, fire and storage".

02 The capital of the project accounts for 20% of the investment amount, which is 15.959 billion yuan, which is contributed by shareholders in accordance with the proportion of shareholdings, and the remaining funds required for the construction of the project are solved through bank loans, financial leasing and other means.

03Due to the high construction in progress, Three Gorges Energy's cash flow is under great pressure, with an asset-liability ratio of 69.36%.

04However, the Kubuqi base project can achieve large-scale development of clean energy and a high proportion of delivery and consumption, which will be of great help to Three Gorges Energy in terms of business scale and market share.

The 05 project is expected to be connected to the grid at full capacity in June 2027, and CTG will receive part of the cash flow benefits after three years.

Technical support is provided by Tencent Hybrid Model

Interface News Reporter | Zhang Yi

On the evening of June 27, Three Gorges Energy (600905. SH) announced that the company plans to invest in the construction of the new energy base project in the central and northern part of Ordos in the Kubuqi Desert of Inner Mongolia (hereinafter referred to as the Kubuqi base project), with a dynamic investment of 79.792 billion yuan.

This is a major national project planned and promoted by the National Development and Reform Commission and the Energy Administration, which is special not only in the huge scale of investment, but also in the complexity and difficulty. The Kubuqi base project integrates "wind, solar, thermal and storage", explores multi-energy complementary technological innovation, and innovates the joint operation model of coal power and new energy.

Three Gorges Energy believes that the project has good resource endowment and consumption conditions, and has a strong symbolic, exemplary and leading nature.

Three Gorges Energy led the "Three Gorges System" to invest in this project, however, the company's construction projects have exceeded 60 billion yuan, and long-term and short-term loans have exceeded 140 billion yuan. As a listed company with a market value of about 120 billion yuan, does its strength match, how to participate, and what are the benefits?

According to the plan, Three Gorges Energy will invest 54.534 billion yuan in 2024, and the installed capacity of new production will strive to be no less than 5 million kilowatts.

The construction in progress is soaring, and the financial pressure is high

CTG Energy is the largest shareholder of China Three Gorges Corporation (hereinafter referred to as CTG), and the actual controller is the State-owned Assets Supervision and Administration Commission. CTG Energy is the main body of the strategic implementation of CTG's new energy business, including onshore wind power, offshore wind power, photovoltaic power generation and other new energy businesses. Therefore, it is reasonable for Three Gorges Energy to take the lead in the construction of this project.

Not only Three Gorges Energy, but also Yangtze River Electric Power (600900. SH) also played an important role in this.

The main investor of the Kubuqi Base Project is Inner Mongolia Three Gorges Mengneng Energy Co., Ltd. (hereinafter referred to as "Three Gorges Mengneng Company"), which is the indirect holding company of Three Gorges Energy. Three Gorges Onshore New Energy Investment Co., Ltd. (hereinafter referred to as "Three Gorges Onshore New Energy") and Inner Mongolia Energy Group Co., Ltd. hold 56% and 44% of their shares respectively. CTG Energy holds a 34% stake in Three Gorges Onshore New Energy and is its controlling shareholder.

Tianyancha data shows that there are four shareholders of the Three Gorges onshore new energy, all of which are "Three Gorges system" companies. Yangtze Power holds 33% of the shares, second only to Three Gorges Energy, with Three Gorges Capital Holding Co., Ltd. and Three Gorges Investment Management Co., Ltd. holding 16.5% and 16.5% respectively.

Nearly 80 billion yuan is planned to build a large project of "wind, solar, fire and storage", what is the income of the Three Gorges Energy?

Source: Tianyancha APP

As of the end of 2023, the audited total assets of CTG Mengneng Company were 3.696 billion yuan, and the operating income and net profit last year were less than one million yuan, which were 992,700 yuan and 989,300 yuan.

So, how can a company with a market value of 120 billion yuan invest in a project of nearly 80 billion yuan?

The capital of the Kubuqi base project accounts for 20% of the investment amount, which is 15.959 billion yuan, which is contributed by shareholders according to the proportion of shareholdings, and the remaining funds required for the construction of the project are solved through bank loans, financial leasing and other means.

Based on this calculation, the project capital that CTG needs to provide is only about 3 billion yuan. This is not difficult for Three Gorges Energy, which has a net cash flow of more than 14 billion yuan from annual operating activities and 6.584 billion yuan of monetary funds on its books. However, the company is still expanding rapidly, with high construction projects and extremely high cash flow pressures.

On the one hand, during the construction of the Kubuqi base project, when the rest of the funds are solved through bank loans, financial leasing and other means, it is bound to further push up the asset-liability ratio of Three Gorges Energy.

As of the end of the first quarter of 2024, CTG Energy's short-term borrowings were RMB1.616 billion, while long-term and short-term borrowings amounted to RMB140.788 billion.

CTG's long-term borrowings have surged in recent years. Long-term borrowings were less than RMB50 billion at the end of 2020, less than RMB100 billion at the end of 2022, and RMB133.670 billion by the end of 2023. It's still on the rise this year.

As of the end of the first quarter of 2024, CTG's asset-liability ratio was 69.36%.

In response to investors' questions about whether there are plans to reduce liabilities, CTG executives responded that the company will plan various investment and financing work in advance in combination with investment plans in the future, so as to control the asset-liability ratio at a reasonable level.

Three Gorges Energy recently announced that it expects the company's total external financing in 2024 to not exceed 79.1 billion yuan: equity financing will not exceed 14 billion yuan, and debt financing will not exceed 65.1 billion yuan. The invested funds are mainly used for onshore wind power, photovoltaic projects, offshore wind power, Shagehuang base investment, industrial chain investment, R&D expenditure, technological transformation and upgrading, etc.

On the other hand, the Three Gorges Energy project under construction is soaring.

At the end of 2023, CTG Energy had 52.988 billion yuan of projects under construction, an increase of more than 17 billion yuan from 35.491 billion yuan at the end of 2022. At the end of the first quarter of 2024, the construction in progress rose to 60.470 billion yuan. In just one quarter, it increased by about 7.5 billion yuan.

According to the "2024 Special Action Plan for Improving Quality and Efficiency and Emphasizing Returns" disclosed on the same day, in 2024, Three Gorges Energy plans to invest 54.534 billion yuan in new investment, and strive to increase the installed capacity of no less than 5 million kilowatts.

Three Gorges Energy said that the company will make every effort to promote the implementation of large-scale base projects and plan a number of large-scale development of onshore wind and solar projects; We will continue to deepen the layout of offshore wind power and continue to increase resource reserves; Optimize the new energy business structure through industrial mergers and acquisitions, and find and invest in incubating a number of emerging strategic industries and new technology enterprises in the upstream and downstream of the industrial chain that have development potential and are closely related to the new energy industry.

After three years, it may be able to contribute cash flow

How much can the state-level mega-project improve the scale of the Three Gorges Energy?

The Kubuqi base project is an integrated transmission project of "wind, solar, fire and storage", with a total of 8 million kilowatts of photovoltaic, 4 million kilowatts of wind power, 200,000 kilowatts of solar thermal, 4 million kilowatts of supporting coal-fired power projects and 5 million kilowatt-hours of new energy storage. The power generated is planned to be sent to the Beijing-Tianjin-Hebei region for consumption through the Mengxi-Beijing-Tianjin-Hebei ± 800 kV UHVDC transmission project.

Once the project is completed, it will be of great benefit to CTG Energy in terms of increasing its business scale and market share.

In 2023, Three Gorges Energy will add 13,535,600 kilowatts of installed capacity, and the cumulative installed capacity will reach 40,044,400 kilowatts. The cumulative installed capacity of wind power reached 19,416,600 kilowatts, accounting for 4.40% of the market share of the national wind power industry; The cumulative installed capacity of solar power generation reached 19,824,200 kilowatts, accounting for 3.25% of the national market share.

Among them, the offshore wind power business is an advantageous business. By the end of 2023, CTG Energy had a total grid-connected offshore wind power capacity of 5,491,600 kilowatts, accounting for 14.73% of the national market share, making it the largest listed company in operation in China. Five million-kilowatt offshore wind power bases are gradually taking shape.

Distribution of the installed capacity of CTG Energy's various businesses at the end of 2023

When will CTG reap the benefits?

The Kubuqi base project is advancing rapidly, and construction will start this year, of which the construction period of the coal-fired power project is less than three years. This means that after three years, CTG Energy will be able to obtain part of the cash flow benefits from this project.

Combined with the requirements and progress of the National Development and Reform Commission's synchronous completion and operation of new energy, regulated power supply and transmission channels of the "Shagehuang" transmission base, the Kubuqi base coal-fired power project is scheduled to start construction in September 2024 and is expected to be connected to the grid at full capacity in June 2027.

"The average construction period of conventional onshore wind power and photovoltaic power generation projects is 6-24 months, and the average construction period of pumped storage projects is usually 6-8 years." Three Gorges Energy executives said at an investor conference a few days ago.

The Kubuqi base project can realize the large-scale development of clean energy and a high proportion of delivery and consumption, "the company has demonstrated the feasibility, technological advancement and economic rationality of the Kubuqi base project design scheme, and the project is technically and economically feasible as a whole." The Three Gorges Energy announcement said.

First, the scale and layout of the Kubuqi base project are reasonable. The scale of new energy development, the ability of system regulation and the capacity of channel transmission are adapted to each other, and the power supply of "wind, solar, fire and storage" is centrally arranged within a reasonable radius from the converter station at the sending end of the DC transmission project. Second, the power transmission scheme of the Kubuqi base project is feasible. The electric energy of the Kubuqi base project is planned to be sent to the Beijing-Tianjin-Hebei region for consumption through the Mengxi-Beijing-Tianjin-Hebei ± 800 kV UHVDC transmission project. Comprehensively consider the characteristics of the sending end resource and the load demand of the receiving end, and reasonably design the power transmission curve, the proportion of renewable energy in the channel is not less than 50%, and the utilization rate of new energy power generation is not less than 90%, so as to meet the requirements of the power transmission index. Third, the Kubuqi base project has mature technical conditions and is economically feasible. The project has a good wind and solar resource endowment, the selection and construction plan of wind power, photovoltaic and solar thermal equipment are comprehensively optimized in combination with resource conditions, engineering geology, performance parameters, etc., and the energy storage is mainly planned in the form of electrochemical energy storage, steam pumped storage, electric heating molten salt energy storage, etc., and the coal power project is a 4 million kilowatt expansion project in the near area of Dongsheng Thermal Power (Selian).

However, Three Gorges Energy made a special risk warning, saying that the investment project has a large investment scale, complex power supply type, high development difficulty, strong technological innovation, and will be affected by uncertain factors such as macroeconomy, industry policy, consumption and electricity price, and the project has certain market, technology, operation and other risks, and there is a certain uncertainty in investment returns.

The Kubuqi base project has been approved by the board of directors of Three Gorges Energy and does not need to be submitted to the general meeting of shareholders for deliberation.

It is understood that the photovoltaic project and solar thermal project of Kubuqi base have been recorded, the wind power project and coal power project have been approved, and all procedures are being promoted.

CTG Energy has been listed on the A-share market for three years, but it has struggled to increase revenue and profits in recent years. Last year, the company's revenue increased by 11.23% year-on-year, and the net profit attributable to the parent company increased by 0.94%; In the first quarter of this year, the company's operating income increased by 15.26%, and the net profit attributable to the parent company increased by 0.10%.

The reasons include the increase in depreciation and operating costs due to the fact that new grid-connected projects in 2022 will be put into operation in 2023; The profitability of shareholding enterprises fluctuated, and investment income decreased by 47.48% year-on-year.

Despite this, CTG Energy's profitability remains strong. In the first quarter of this year, with a revenue of 7.899 billion yuan, a net profit attributable to the parent company of 2.422 billion yuan was obtained. The gross profit margin was 58.96%, and the net profit margin was 36.59%.

In October 2023, Three Gorges Corporation, the controlling shareholder of Three Gorges Energy, announced a plan to increase its holdings, and so far, it has increased its holdings of more than 44.47 million shares of the company, with an increase of nearly 200 million yuan.

In early trading on June 28, Three Gorges Energy's share price rose 1.40% to close at 4.34 yuan per share.

View original image 244K