Summary of Conference Call Notes on China Electric Utilities Industry Overview - The conference call discusses the **China Electric Utilities** sector, focusing on the impact of recent government policies and coal prices on the industry. Key Points Coal Prices - The **PRC Sxcoal spot coal price** (5,500 kcal/kg) at Qinhuangdao was steady at **Rmb 711/tonne** on February 11, 2026, reflecting a **+1.8% week-over-week (wow)** and **+1.2% month-over-month (mom)** increase, but a **-0.2% year-over-year (yoy)** decrease [1][6] - The rise in coal prices was attributed to **Indonesia's coal export stoppage** due to government proposals to limit output [6] Government Policy - The **General Office of State Council** issued a policy paper titled **'Implementation Opinions on Improving the National Unified Power Market System (Policy No.4 in 2026)'** aimed at breaking provincial barriers and normalizing cross-region trading [2] - The policy promotes the development of market systems including long-term, spot, auxiliary services, capacity payments, and retail markets, with a target for completion by **2030** and full establishment by **2035** [2] Investment Opportunities - The new policy is expected to stimulate investments in the **PRC power industry**, benefiting power grid and plant equipment manufacturers [1] - Preference is given to **equipment suppliers** over operators, as suppliers are expected to gain from increased capital expenditures (capex), while operators may face margin cuts due to market-based tariff reductions [1] - Companies with **Buy ratings** include **Sieyuan**, **TBEA**, **Goldwind**, and **Dongfang Electric** [1][17] Energy Storage Systems (ESS) - A policy issued by the **NDRC** on January 30, 2026, states that only **grid-side independent ESS** are eligible for capacity payments, while wind and solar farms with ESS do not qualify [3] - The increased battery unit cost, driven by rising lithium prices, is expected to negatively impact **Sungrow's** gross profit margin on ESS sales, which was nearly **40% in Q3 2025** [4][5] - An **8% increase** in battery costs in January 2026 could lead to a **2% reduction** in Sungrow's net profit for every **1 percentage point** cut in gross profit margin [5] Market Dynamics - The **coal inventory** at Qinhuangdao Port decreased by **5.4% wow** to **5.30 million tonnes**, which is **16.9% below** the average of **6.38 million tonnes** in 2025 [6] Additional Insights - The call highlights the importance of monitoring coal prices and government policies as they significantly influence the profitability and operational strategies of companies within the electric utilities sector [1][2][4] - The focus on energy storage systems and their eligibility for capacity payments indicates a shift towards integrating renewable energy sources into the national grid, which may present both challenges and opportunities for existing players in the market [3][4]