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Environmental Protection Sector - Recent policy shed some light on WTE subsidy

作者: Tommy WONG,Eric SIU
时间: 2020年02月14日
重要性: 一般报告
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摘要: Report title:Environmental Protection Sector - Recent policy shed some light on WTE subsidy
Analyst:Tommy WONG,Eric SIU
Report type:Industry
Date:20200214
[Summary]

■ NDRC’s announcement of additional WTE applications for subsidies reaffirms government's resolve on environment protection
■ Incremental positive policy development, further details on approval standards, timing and level of subsidies will be key
■ Maintain OVERWEIGHT; Long-term investment thesis is unchanged
Central government subsidies support to continue
National Development and Reform Commission (NDRC) has announced to conduct the mid-to-long term plan for WTE (link), requiring each province to submit a special proposal by the end of March with a list of WTE plants. The eligible WTE projects will be those fit under local government’s WTE development plan until 2030. As a result, these included WTE projects will have priority to funding by the central government. Projects not included in this proposal will be supported by local governments. This announcement comes as a further clarification on top of the “Opinions of Promoting the Healthy Development of Non-hydro Renewable Energy Power Generation” (link) announced by the Ministry of Finance in January in support of a healthy development of the WTE industry.

Positive policy development, more details to boost confidence
We believe this is a positive policy signal, likely to imply that all WTE operators’ projects under our coverage will be covered by subsidies (meaning potential projects currently under construction and preparation pipeline), in comparison to only include projects which commence operation before the end of 2020 as expected by the market before. Also, there will not be a one-off cut in subsidies as local governments will continue to provide the respective subsidies for projects outside the proposal as stated in the announcement. However, aware of overall concern of government subsidies in general, we think clarification on collection period and level of subsidies for these projects would provide further confidence to the market.

Positive implication for current collection delay issue
Among our covered WTE operators, by the end of 2019, they all have large proportion of WTE projects in operations that are not included in the renewable energy fund list but should be able to be included in the new proposal; [i.e. 72% for China Everbright International (257 HK, BUY, TP:HKD7.25); 91% for China Everbright Greentech (1257 HK, BUY TP:HKD7.0); and 69% for Canvest (1381 HK, BUY, TP: HKD4.7)]. In our view, this incremental policy development has positive implication on longer term resolution of WTE operators’ current subsidies collection issues, and reaffirms central government's resolve on environmental protection.

全文: CMS(HK) Research - Environmental Protection Sector - Recent policy shed some light on WTE subsidy [OVERWEIGHT] ~ Tommy WONG,Eric SIU.pdf
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