Summary of Conference Call Notes Industry Overview - The discussion primarily revolves around the **electric power industry**, focusing on both **thermal power** and **renewable energy** sectors, particularly in the context of recent market performance and regulatory changes. Key Points and Arguments Hydrological Data and Its Impact - Recent hydrological data indicates a slight decline, with the inflow at the Three Gorges Dam showing a year-on-year decrease of 2% compared to the beginning of the year. In contrast, the inflow at the Yangtze River has increased by 11.2% year-to-date. This situation has led to significant water retention efforts at the Yangtze River, impacting inflow rates substantially [1][1]. Performance of Power Companies - Companies such as **Huayin, Jingkong, and Datang Power** have shown strong performance, primarily driven by improved earnings in the thermal power sector. Conversely, gas and hydropower companies have experienced declines, indicating a lack of strong market preference for local assets [2][2]. Investment Sentiment and ETF Trends - The overall allocation to the electric power sector has decreased significantly, with the proportion dropping to 0.87% by the end of Q1, a reduction of approximately 66% from previous levels. This low allocation is attributed to a lack of confidence in ETFs, despite positive trends in the performance of thermal and hydropower ETFs [3][3]. Future Outlook for Thermal Power - The thermal power sector's performance is expected to extend beyond Q2, with ongoing strong earnings anticipated for Q3 and the full year. Current low coal prices are likely to further adjust the annual average coal price downward, with spot coal prices down by 227 yuan year-on-year [5][5]. Dividend Stability and Policy Implications - The stability of dividends is projected to increase, aligning with the broader trend of public sector investment. The introduction of new policies, particularly in Shandong, has set benchmark prices for mechanism electricity, which may enhance the return on equity (ROE) for green energy projects [6][9]. Mechanism Electricity Pricing - The recent policy changes in Shandong have established higher benchmark prices for mechanism electricity, which could positively influence the valuation of pre-construction investments. The expected utilization hours for existing projects are estimated to be between 80% and 85% [9][11]. Investment Strategies - Two primary investment strategies are suggested: focusing on short-term opportunities in green energy during the performance vacuum period and identifying long-term investment opportunities as policies are implemented. Companies with high ROE in the energy sector are highlighted as worthy of attention [14][15]. Market Dynamics and Portfolio Composition - The current market dynamics indicate a significant under-allocation to the electric power sector, with many companies showing a holding ratio of around 0.1%. This under-allocation is expected to shift as the market begins to recognize the value in both thermal and hydropower investments [17][18]. Additional Important Insights - The call concluded with a summary of investment combinations, emphasizing the defensive and offensive strategies within the thermal and renewable energy sectors, respectively. The importance of policy-driven investments in green energy was reiterated, highlighting the potential for high ROE companies in the energy sector [19][19].