Huaneng Renewables reported January power output data: total monthly output was 2,444 GWh (+11% MoM & +22% YoY), of which 2,342 GWh came from wind (+11% MoM & +22% YoY) and 103 GWh from solar (+7% MoM & +22% YoY).
January 2017 wind utilization improved by 22% YoY to 228 hours. This is mainly due to strong power demand and curtailment easing. Jilin, Guangxi and Zhejiang delivered the strongest utilization improvement, respectively up 358%/162%/123% YoY. A better macro economy and more working days in January 2018 due to Spring Festival led to stronger power demand which contributed to utilization improvement.
Grid curtailment ratio is 6.6% in January 2018 (13.7% in January 2017, down 7.1ppt). Based on our calculation, among the 41-hour YoY improvement in utilization, 14 hours were contributed by lower curtailment. This improvement followed the trend in the second half of 2017 when an average curtailment of 6.1% was maintained.
Valuation and recommendation
Maintain our 2017/18/19 EPS forecast at Rmb0.29/0.36/0.37. Reiterate BUY rating and TP of HK$3.35.
Weak wind resources, curtailment issues.