Power industry: promoting private capital investment and pushing reform to accelerate

Events: Opinions on deepening the reform of the economic system in the 2009.　　May 25, the State Council passed and officially announced the "2009 deepening of the economic restructuring of the views", "opinion" to speed up the promotion of electricity, municipal public utilities and other reforms to make clear instructions.　　The opinion on deepening the work of economic system reform in the 2009 makes clear instructions for broadening the fields and channels of private investment.　　Accelerate research to encourage private capital to enter the oil, railways, electricity, telecommunications, municipal utilities and other important areas of the relevant policies.　　Accelerate the separation of power grid enterprises and the reform of rural power system (development and Reform Commission, Electricity Supervision Committee, SASAC, Energy Bureau, Ministry of Finance and Ministry of Water).　　Accelerate the reform of municipal public utilities, expand the urban water supply and heating supply, sewage treatment, waste disposal and other franchise areas (housing urban and rural Ministry of Construction, water department).　　The opinion on deepening the economic system reform in the 2009 also makes a clear statement on promoting the price of resource products and the reform of energy saving and environmental protection.　　Continue to deepen the reform of electricity price, set up the mechanism of electricity price formation which adapts to the moderate competition of power generation, promote the reform of electricity transmission and distribution price, adjust the classification structure of sales price, reduce the cross subsidy between different kinds of users, rationalize the relationship of coal electricity price at the right time, and study and formulate the policy of universal service of rural electricity　　To promote the direct purchase of large users and bilateral trading pilot (Commission, Development and Reform committee responsible).　　Accelerate the establishment of the initial water rights system, actively promote water price reform, gradually improve water conservancy projects for non-agricultural water prices, and improve the collection management system (resources, development and Reform Commission, Ministry of Finance).　　To establish a circular economic assessment system (development and Reform Commission, Ministry of Finance, Environmental protection, industry and Information Technology Department, Bureau of Statistics) to explore the establishment of environmental law, green credit, performance assessment, public participation and other long-term environmental protection mechanism (led by the Ministry of Environmental Protection).　　Accelerate the process of sewage treatment, waste disposal system reform (Development and Reform Commission, housing, Urban and rural construction, environmental Protection Department is responsible); Accelerate the pilot work of the ecological compensation mechanism in the Trans-province watershed, expand the scope of the pilot of emission trading and perfect the relevant laws and regulations (Ministry of Finance, Development and Reform Commission, Environmental Protection Department, Our comments and analysis to promote private capital investment, push the reform process to accelerate the promulgation of the "opinion", its purpose is to attract and promote private capital investment, the specific implementation of power, municipal public utilities in the field is: to encourage private capital into the power, municipal utilities and other important areas, expand urban water supply and heating supply,　　Sewage treatment, garbage disposal and other franchise areas.　　Capital is profit-making, if we want to attract private capital to enter the above fields and promote investment, we must let private capital see the fair competition environment, profit possibility and investment return space. At present, there are still some problems such as non-market pricing mechanism, opaque competition and unclear investment cost in power and municipal public utilities industry, resulting in losses of all industries such as the whole industry and loss of water supply industry.And so on, industry development itself to the need to further deepen the stage of reform in order to solve the existing problems; the introduction of this "opinion" can be said to have forced the relevant industry reform process accelerated.　　We have seen the specific reform or pilot measures and principles on electricity and municipal utilities industry in the opinion, which also formally focus on clarifying the cost of each link, creating a transparent competitive environment and realizing the reasonable return on capital. Restart the power reform first into the State Council documents, follow-up reform action Jianzaixianshang.　　This "opinion" clearly put forward to accelerate the separation of power grid enterprises and agricultural power system reform, continue to deepen the reform of electricity prices, promote the direct purchase of large users and bilateral trading pilot; This is the first time, after the meeting of the Commission and the report of the Government of Premier Wen Jiabao, the direction and link of power reform have been clarified in the form of the State Council red.　　In our report of January 16, "The path choice of China's electric power reform: the experience of the European Union and the United States", it is pointed out that the power reform needs to solve the problem that the electricity price and the pricing mechanism of selling electricity price move from plan to market.　　The market pricing mode of the net electricity price needs to meet the direct transaction between the buyer and the buyer, which puts the pilot of direct electricity purchase and bilateral transaction of large users on the agenda, and the current Electric Supervision Commission is conducting pilot projects in local areas or individual industries.　　The market demand of sales electricity price has different classification structure of current sales price, and there is an adjustment of cross subsidy among various kinds of users ' electricity price.　　The determination of the sales electricity price and the net electricity price needs to clear the charging standard of the transmission and distribution network fee, which needs to calculate the full cost of the grid, which requires the first power grid enterprise to realize the main-auxiliary separation. This "opinion" clearly on the above issues, means that the government has to separate the main auxiliary power grid enterprises, the formation of a moderate competition in the power generation link pricing mechanism, transmission and distribution price reform, such as the implementation of the specific or pilot program; contact with the regulatory authorities such as the electric watchdog this year,　　We believe that the subsequent pilot of power reform is Jianzaixianshang. The nationwide water price adjustment process will continue.　　We reported on June 30, 2008, "Water Price theme: to meet the value of scarcity of resources," said, as the CPI fell, the artificially underestimated water prices will return to their reasonable value; into 2009, as CPI, PPI continued to lower, all over the world began to raise water prices.　　The opinion points out that the initial water right system should be speeded up, the reform of water price should be promoted, the price of Water Conservancy project should be improved gradually, and the management system should be improved. This will encourage the continuation of the water price adjustment process everywhere. Policy escort, continue to optimistic about solid waste treatment industry.　　In the February 22, 2008 issue of "The Garbage Power Generation project: Grasping the expansion of austerity", we pointed out that the solid waste treatment industry represented by refuse generation will soon usher in a rapid growth period. There are two major risks to restricting the development or investment of the solid waste treatment industry: The government's ability to pay: due to the fact that the solid waste disposal operators are paying for the main income with the government settlement of the garbage disposal subsidySource, so whether the government can pay the subsidy in full and on time is the focus that the investment operator needs to consider.　　No classification of waste brings low investment return risk: Because China's garbage has not been achieved classification, incineration, composting and other treatment methods to dispose of waste efficiency is lower, reducing the solid Waste treatment project investment return.　　This "opinion" to the municipal public domain position, can be described as the right remedy: speeding up the promotion of sewage treatment, waste treatment and other fee system reform directly enhance the Government's ability to pay, reduce the government to pay the risk.　　The study and establishment of the circular economy assessment system will indirectly reduce the government payment risk (if the government defaults to pay the subsidy, the solid waste treatment operation project cannot operate, then the circular economy examination is not standard.　　Expanding the pilot scope of emission trading, and even the future emission rights into the exchange market, will create another important source of income for the solid waste processor and increase the return on investment.　　We maintain our previous judgment and continue to be optimistic about the solid waste disposal industry, which is mainly based on MSW incineration, and is optimistic about the investment opportunities of operators, engineers and equipment providers. Investment strategy and referral company.　　Under the background of electricity price reform, we have long been optimistic about those enterprises which are close to terminal consumption (for direct purchase of electricity and bilateral trading) as well as the strong competitive power and low cost of generating electricity.　　Focus on the separation process of power grid enterprises, pay attention to the relevant local grid or local government-owned listed companies investment opportunities, such as Xichang Power, Chen International and so on.　　Municipal public domain, we are most optimistic about the waste power generation as the representative of the solid waste treatment sub-industry, optimistic about the relevant operators, engineering and equipment business investment opportunities, but also concerned about the water listed companies in the region water price adjustment process. Electric power listed companies recommended ranking: Shanghai Electric power, State electric power, Shen shares.　　Shanghai Electric Power: With the shutdown of small units and large units into production, the company's fundamentals will change in 10, and the market has not yet recognized the reasonable value of the company should use 10-year performance valuation, the future market repair valuation dislocation brings investment value.　　Guo Dian Electric power: Large shareholder Guo Dian Group injection of asset expectations and next year warrants due to the right to the expected price is a strong support.　　Shen shares: The company's share price is currently at the edge of the lower valuation, underestimated obvious.　　Municipal public Utilities listed companies: City Investment Holdings, combined Resources City Investment Holdings: The major shareholders benefited from the integration process of Shanghai state capital, the company's own water business development and stability, environmental business growth faster, and the real estate business is steadily advancing. Combined resources: benefiting from the solid waste Treatment project construction of the big cycle up, the company is developing waste power generation projects, if the first single, will be in the garbage power generation project to divide the cake and ensure the next 1-3 years growth rate.