CGN Power Co Ltd Shs -H- Unitary 144A/Reg S 01816

Chinese Power Utilities: Strong Performance on Improving Sentiment; Select Opportunities Remain

The year-to-date share price performance of China utilities under our coverage have generally staged a strong recovery since May, given improving sentiment in the Hong Kong equity market and their cheap valuations. In addition, the market is expecting more positive policy measures from the upcoming third plenary session in July. We have seen the National Energy Administration calling for increased investment in the national grid recently to avoid curtailment risk on the back of the significant rise in renewable energy capacity. While we are positive about this in the longer term, we caution that the concerns about slow subsidy settlements and falling tariffs will remain in the near term.