Huaneng Renewables' wind power generation up 21.5% in September

Is policy uncertainty threatening the firm?

Huaneng Renewable's wind power generation increases by 21.5% YoY in September, but a deceleration compared to the 51-52% YoY growth in July and August. Jefferies reported that the largest contribution to the 180mn kWh increase was by Xinjiang (+32mn kWh), Shaanxi (+31mn kWh), Guangdong (+28mn kWh), Yunnan (+26mn kWh), Shandong (+20mn kWh), and Jilin (+20 mn kWh).

Here's more from Jefferies:

We expect wind power generation growth to remain robust in the fourth quarter, especially considering the base effect. Last year, Longyuan's wind power generation declined by 5% YoY while Huaneng Renewable's wind power generation increased by 3% YoY.

Wind power utilization hours in China have increased by 38% QoQ in the fourth quarter over the past four years. Policy uncertainty creating headwinds though. The improvement in operational metrics has been overshadowed by concerns that wind and solar power tariffs may be lowered again.

We believe like the last tariff adjustment, the bark is worse than the bite. Shares of Longyuang and Huaneng Renewable are trading at 12.3x and 8.6x consensus 2016
earnings.

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