摩根士丹利中国城市化20大湾区向低碳能源转型的受益者们2019101397页

MMChina'sUrbanization2.0BeneficiariesoftheGreaterBayArea'sTransitiontoLow-CarbonEnergyMorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestmentdecision.Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoNASD/NYSErestrictionsoncommunicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.NuclearisthebestoptionforGBA'stransitiontolowcarbon.WedoubleupgradeCGNPowertoOWandupgradeHKEItoOW.October13,201910:43PMGMTMMMORGANSTANLEYASIALIMITED+SimonH.Y.Lee,[e-mail]N[e-mail][e-mail][e-mail]'sUrbanization2.0BeneficiariesoftheGreaterBayArea'sTransitiontoLow-CarbonEnergyNuclearisthebestoptionforGBA'stransitiontolowcarbon.WedoubleupgradeCGNPowertoOWandupgradeHKEItoOW.Nuclearrenaissancefrom2020:WeexpectaccelerationofnuclearapprovalsuponcommissioningofChina'sfirstHualongOneunit.Nucleariscompetitivewithcoalundernewmarketstructure,andwillreplacecoaltobecomethecorebaseloadpowersource.CGNPowerwillbethekeybeneficiary.HydropowerfromYunnanandTibetfrom2025:WesttoEastPowersupplied36.2%ofGuangdong'spowerdemandin2018.Weexpect10-20GWofadditionalpowertoGuangdongby2030,pri-marilysuppliedbyChinaYangtzePower'sWudongde(5GW)andHuanengHydro'splanned10GWofTibetanhydropower.HongKongtoimportfromGuangdong:HongKong'stargetofdecarbonizationby2050requires80%cleanenergy,vs.localresourcesof3-4%.ImportnuclearfromGuangdongistheonlyviableoption.WeexpectCLPtoimportmorefrom2025andHKEItocon-nectwithGuangdongviaunderseapowerlines.UpgradeCGNPowerandHKElectricInvestmentstoOW:ForCGNPower,weseeaccelerationofapprovalsbasedonHualongOneandrisingdividendswithitsstrongFCF.HKEIoffersthehighestyieldamongHKutilitiesandregulatedassetgrowthfromunderseacon-nectionwithGuangdongnuclearplants.MaintainOWonChinaYangtzePowerandEWonHuanengHydro:CYPCmayhavedividendgrowthupsidefrom2021basedona70%payoutratio.HuanengHydro'scapexon10GWcapacityinTibetcoulddelaydividendupside.ResumecoverageofCKIandPAHatEW:Weseerisingnear-termFXvolatilityinGBPaheadofBrexit,withregulatoryresetsinUKandAustralianassetscuttingrelatedearningsby~10%.CKI'sthreeacqui-sitionsin2017generated5%ROE,lowerthanexpected.IndustryViewChinaUtilities—AttractiveGBAwillbeChina'sleadingregionincarbonreductionandairquality:TheParisAgreement,airpollutionandenergyefficiencypressure,andGBA'spowertariffaffordability–thehighestinChina–allpointtoGBAbecomingChina'sleaderinitsdecarbonizationstrategy.Weexpectcleanenergytobe80%ofGBA'sinstalledcapacityby2035,faraheadofChina'saverageof65%.GBA'splantoreducecoal:GBAhas32GWofcoalpowercapacitytodayandplansa31%reductionby2035,to22GW.Excludingcoal,nuclearandimportedhydropowerarethemostcompetitiveenergysourcesvs.gasandoffshorewind.Weexpectincreasesof180%innuclearand50%inhydropowerimports.WHAT’SCHANGEDFromToHKElectricInvestments(2638.HK)PriceTargetHK$7.00HK$8.60RatingEqual-weightOverweightCKInfrastructureHoldingsLtd(1038.HK)RatingNAEqual-weightPriceTargetNAHK$54.00PowerAssetsHoldingsLtd(0006.HK)PriceTargetNAEqual-weightRatingNAHK$57.00CGNPowerCo.,Ltd(1816.HK)RatingUnderweightOverweightPriceTargetHK$1.80HK$2.52ChinaYangtzePowerCo.(600900.SS)PriceTargetRmb18.00Rmb20.00HuanengLancangRiverHydropowerInc(600025.SS)PriceTargetRmb4.39Rmb4.50M4MContents5TheFundamentalBackdrop6KeyConclusions8SummaryofStockIdeas14China:GuangdongGBAActionPlan2018-2020andChinaSouthernGridPowerIndustryPlanningto203523Nuclear–Long-awaitedRenaissancefrom202025Hydropower–GoesFurtherWestfromYunnantoTibet27CuttingCoalandReplacingItwithGasandOffshoreWind–ExpensiveOptionsUnlikelytoReplaceBaseloadDemand32HongKong:ThePathtoDecarbonization37ElectricityGeneratorsinHongKong–CLPHoldingsandHKElectricInvestments41CGNPower–DoubleUpgradetoOWfromUW47CGNPower–ChangesinKeyAssumptionsandEarningsEstimates49CGNPower–ValuationMethodology51CGNPower–FinancialSummary52HuanengHydro–MaintainEWRating55HuanengHydro–ChangesinKeyAssumptionsandEarningsEstimates58HuanengHydro–ValuationMethodology60HuanengHydro–FinancialSummary61ChinaYangtzePowerCompany–MaintainOWRating63ChinaYangtzePowerCompany–FinancialsandEarningsEstimates65ChinaYangtzePowerCompany–ValuationMethodology67ChinaYangtzePower–FinancialSummary68CLPHoldings–MaintainEWRating69CLPHoldings–ChangesinEarningsEstimates70CLPHoldings–ValuationMethodology72CLPHoldings–FinancialSummary73HKElectricInvestment–UpgradetoOWfromEW74HKElectricInvestments–ChangesinEarningsEstimat