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[Foreign Language] Good afternoon, ladies and gentlemen. On behalf of Huaneng Power International, Inc., I would like to welcome you all to the conference call regarding the first quarterly results announcement of 2023. Now may I introduce the management of the company today. The Chairman of the company; Mr. Keyu Zhao.
[Foreign Language]
The Independent Director of the company, Mr. Xu Mengzhou.
[Foreign Language]
The Chief Accountant of the company, Ms. Lixin Huang.
[Foreign Language]
Vice President and the Board Sector to the company, Ms. Chaoquan Huang.
[Foreign Language]
People in charge of the related departments have also joined us in this meeting. [Foreign Language]
First of all, the Vice President and the Board Secretary to the company, Ms. Huang, will review business performance for the first quarterly results of 2023, followed by a Q&A section.
[Foreign Language]
May we have the honor to invite upon to review the business performance, and Ms. [indiscernible] will conduct the English interpretation. [Foreign Language]
[Interpreted] Ladies and gentlemen, good afternoon. Welcome to the first quarter results conference call of Huaneng Power International. Yesterday, the company has released the first quarter result. Please let me give a brief introduction.
In the first quarter, the company maintained safe operation. The unit fuel cost decrease comparing to the last quarter, resulting in a significant loss reduction in coal power sector and the profit of overseas projects increased which laid a solid foundation to complete the company's tasks of operation and development. Under the Chinese accounting standards, the company achieved a consolidated operating revenue of CNY 65.269 billion, increasing by 0.03%. Net profit attributable to company's shareholder was CNY 2.25 billion, increasing by CNY 3.2 billion. The earnings per share was CNY 0.1. In terms of power generation, the company's domestic on-grid power sales was 107 billion kilowatt hour, decreasing by 0.66%. The average utilization hour was 919 hours decreasing by 52 hours. The average tariff was CNY 58.69 per megawatt hour increasing by 3.3%. In terms of coal supply, the company is actively negotiating with upper-stream suppliers, locking contracted coal resources and strive to increase contract coverage ratio and honor rate.
With the implementation of government policies, coal prices have fallen from peaks. The unit fuel cost of the first quarter was CNY 340.02 per megawatt hour, a year-on-year decrease of 5.82% and a quarter-on-quarter decrease of 3.91%. In terms of development, the company is pushing forward clean energy development. In the first quarter, the company added 1.3 gigawatts of units, including 111 megawatts of wind power, 693 megawatts of solar power and 495 megawatts of gas-fired power. The company's installed capacity reached 128.648 gigawatts, wind and solar capacity reached 20.56 gigawatts. In terms of overseas operations, Tuas Power overcame the disadvantages of soaring fuel prices and tight supply of natural gas, time to market and optimized competition strategy. The profit has increased significantly. In the first quarter, the profit before tax was CNY 966 million, increasing by CNY 521 million.
In the second quarter and the last half of the year, the company will focus on quality and profitability, continued market research coordinate safe production, grid transition and efficiency improvement, moving forward the tasks of operation and development. The company will continue the clean energy development and accelerate the transition, improve the fulfillment of medium- to long-term coal contract, optimize the supply structure and control the fuel cost, insist on profitability, coordinating volume and price, conduct market research and strive for a profitable power generation, explore innovative financing and expand financing channels to reduce costs.
Now my colleague and I would like to answer your questions. Thank you.
[Operator Instructions] The first question comes from a Pierre of Citibank.
[Foreign Language]
[Interpreted] I have three questions. First, in the first quarter, the unit fuel costs have dropped for the company, which was the proportion of contract coal purchased? And what was the honor rate in the first quarter? Second, about the solar sector as the generation of solar power has increased. Could you please tell us why the profit increase is higher than the power generation increase. Third, about the control of cost. What was the company's financial cost of interest-bearing debt? And what will be the company's guidance of interest rates.
[Foreign Language]
[Interpreted] In the first quarter, the company had signed 150 million tons of contracted coal and the coverage ratio is about 95%. In the first quarter, the company's honor rate of long-term contractor was 75.7%. The number of last year was 68%. Last year, have a high honor rate because the government-regulated price range haven't been implemented yet. The coal mines have more incentive to honor the long-term contract. The second question about the solar profit, the solar sector profit had increased mainly due to, first, the utilization hour increased and second, the capacity have increased by 65.87%. And also, the unit cost of the solar sector have dropped from CNY 255.56 per megawatt hour, it has CNY 100 per megawatt hour drop. The financial cost of interest-bearing debt in the first quarter was 3.33%. About the future guidance of the interest rate. First, the company will actually take measures to seize the opportunity to issue 1 decarbonization instruments to control the financial cost. It is on the premise of the government present monetary policy, the company will keep a close track on the government regulation change and take appropriate measures.
[Interpreted] The honor rate of this year is higher than what we have achieved last year. Thank you.
[Foreign Language] The next question comes from [indiscernible] of [indiscernible] Securities.
[Foreign Language]
[Interpreted] I have three questions. First, could you please clarify the renewable energy capacity in the first quarter that added the company. Second, about the perpetual bond, what will be the company's guidance of the future issuance of perpetual bonds. Third, about the company's net cash flow. Could you please tell us why the net cash inflow has dropped in the first quarter.
[Foreign Language]
[Interpreted] So let me clarify the numbers. The 1.8 gigawatts is including the natural gas units. We have 800 megawatts of renewable energy and 495 megawatts of natural gas units in renewable energy capacity, 111 megawatts is wind power and 692 megawatts is solar power. The company has added CNY 17 billion of perpetual bond. However, the company hasn't had any specific plan in the future. Thank you.
[Interpreted] The company will refinance our perpetual bond if it had ended, but won't have any incremental perpetual bond. The operating cash flow of the company has dropped. However, the net profit has increased. That was mainly due to re-piling up the inventory. In the first quarter 2022, the inventory have decreased that have an impact of CNY 8.1 billion to our cash flow. However, this year, it only have an impact of CNY 2.5 billion. So the operating cash flow have a negative CNY 5.6 billion decrease year-on-year.
[Foreign Language] The next question comes LI Yalin of Huatai Securities.
[Foreign Language]
[Interpreted] I have 2 questions. First, could you please give us the net profit and profit attributable to the shareholders in the first quarter that break down to different energy resources. Second, we heard that the wind output is strong. for the company in the first quarter. And could you please give us why that happens and the guidance in the future.
[Foreign Language]
[Interpreted] Equity-based net profit is only for your reference. We have added the numbers from our power plants. In the first quarter, the coal sector -- for coal sector, it was CNY 120 million -- negative CNY 120 million. For gas sector, it was CNY 50 million. And for the wind sector, it was CNY 1.64 billion. For the wind sector, the number was CNY 240 million. For the hydro sector, it was CNY 20 million and breakeven for the biomass sector. In the first quarter, we have a strong wind output because we have very good wind resources comparing to last year, mainly in areas like soft west of China, Central China and Northeast of China. The utilization hour have increased 73 hours. It's very difficult to anticipate the wind resources in the following quarters.
What is the profit situation for our power plant in Pakistan?
[Foreign Language]
[Interpreted] The profit deferred tax for the project in Pakistan is CNY 160 million. The profit attributable to the shareholders is about CNY 60 million. The profit before tax have CNY 23 million decrease comparing to the period last year. And profit attributable to shareholders is about CNY 6 million decrease to the same period last year.
[Foreign Language] The next question comes from Xiujie Huang of Guosen Securities.
[Foreign Language]
[Interpreted] I have 3 questions. First, what was the utilization hour of our coal sector and will there be a tightness in power supply this year? And how can the company build the gap of the utilization hour. Second, in the second quarter where the company think the coal price will drop. How about the tariff or the tariff drop in accordance with the coal prices drop. Third, about the renewable energy participation in the spot market, what is the percentage of the market-based renewable energy [indiscernible] and by how much of the renewable energy generation has been participated in the spot market and what will be the company's measures taken to cope this problem?
[Foreign Language]
[Interpreted] Toll utilization lower was 1,036 hours and about by [ 50 ] watt hours year-on-year. That was mainly because of following reasons: first, the renewable energy capacity has increased with the strong hydro -- wind output that dampens the thermal unit utilization hour. And for areas that have spot market, the spot market price was very low. The thermal power has used a strategy to cut some power generation to have more profit. About the electricity market, the government estimate that in this year we'll have a tight balance excluding summer peak and winter peak. However, it will be better than what we have in last year. We estimate in the second quarter, the supply and demand structure were eased for coal prices. From the supply side, by the end of March, we can see the government policy of ensuring the supply have extended and the government also extends the 0 duty policy for imported coal. So we can see from both domestic and overseas market, there are sufficient supply.
From the demand side, second quarter is usually the off-season of coal market. And with the heating season ended in second quarter, the second quarter's demand will decrease comparing to the first quarter. The demand of supply will ease in this year. For example, the 5,500-kcal coal in those ports, yesterday, price was CNY 193 per ton. It has 34.4% decrease comparing to the higher point last year, which is CNY 1,624 per ton and it has about 33% decrease comparing to the high point in the first quarter, which is CNY 1,266 per ton. However, this year, we may impacted by the extreme weather. So before the summer peak, the power plants may piling up their inventory. So in the second quarter, we have a limited room for the price to continue to drop, and we may hit the bottom of the coal prices. About the tariff guidance in the second quarter, the company have signed 67% of our total market-based power sales. For that part, we have locked up 20% tariff hike. The tariff cut may appear in the monthly bidding in the spot market considering the coal price drop, we think the impact will be limited for our company.
Third, about our renewable energy participate in the spot market, there are 3 products that we have -- power plants that participate in the small market that is Shanxi, Shandong and Gansu. When the renewable energy have great output, the spot market tariff will have a greater drop, especially comparing to the coal tariff drop. In Shandong, we may have a 60% -- CNY 60 per megawatt decrease. And in parts of Shandong may have a CNY 30 per megawatt of decrease and Gansu is the same as Shanxi. We should coordinate the coal-fired units with our renewable energy when the -- when we have great output in wind and solar power, the coal-fired units can make room for the wind and solar to cut the curtailment. And when the way -- there's an other way around, the coal-fired units can increase power generation by long-term contracts.
[Foreign Language] The next question comes from Jin Xu of Guosen Securities.
[Foreign Language]
[Interpreted] I have 3 questions. First, the company have announced that CNY 1.5 billion revenue from the peak load adjustment and ancillary services so what is the major provinces that participate in the ancillary services and what is the unit revenue for ancillary services? And in the first quarter, what was the company's revenue from peak load adjustment and ancillary services? Second, about the Tuas Power, could you please provide us the tariff and the fuel costs change year-on-year and quarter-on-quarter. Third, what is the interest payment of our perpetual bond?
[Foreign Language]
[Interpreted] The major revenue of peak load adjustment is from Liaoning, [indiscernible] and Fujian and also Central North part of China, although all our units have -- our subsidiaries in different provinces have all participated in the market from Northeast, we have the major revenue. We don't have unit revenue from ancillary services. We can give you that later after this meeting. In the first quarter, the ancillary services revenue was about CNY 792 million. Numbers of Tuas Power, in the first quarter, the tariff was CNY 1,375.8 per megawatt hour, and unit fuel cost was CNY 762.15 per megawatt hour. In the first quarter 2022, the tariff of Tuas was CNY 786.64 per megawatt hour, and unit fuel cost was CNY 524.9 per megawatt hour. For the whole year 2022, the tariff of Tuas Power was CNY 944 per megawatt hour, the unit fuel cost was CNY 655 per megawatt hour.
[Foreign Language]
[Interpreted] The interest payment of our perpetual bond in the first quarter 2023 was CNY 667 million. We can give you a guidance of the whole year perpetual bond interest payment. Our outstanding perpetual bond was CNY 80.5 and the average interest rate was 3.81%.
The next question comes from [indiscernible] of [ Central York Front ].
[Foreign Language]
[Interpreted] I have 2 questions. First, in our profit before tax breakdown to different energy sources, is the asset impairment included in this breakdown of profit. Second, could you please provide us the equity-based capacity of coal-fired units?
[Foreign Language]
[Interpreted] The asset impairments have been included in our last year's profit break down. However, in the first quarter, we don't have any asset impairment. The equity base capacity of our coal-fired units is 77.22 gigawatts.
[Foreign Language] The next question comes from [indiscernible] of [indiscernible] Securities.
[Foreign Language]
I have 3 questions. First, could you please provide us the price and volume of our seaborne coal in first quarter. Second, as the company's target renewable energy added was 40 gigawatts in the 14th 5-year period in the last 2 years or 14th 5-year, we'll have to add 22 gigawatts, will the company accomplished this target? Third, as the company have a very high debt-to-asset ratio and the company's CapEx will maintain high with the high renewable energy capacity added. What will be the company's access to refinance? And will the company consider equity-based financing method?
[Foreign Language]
[Interpreted] In the first quarter, the company has purchased 21.33 million tons of seaborne coal with an average price -- local price of CNY 767.8 per ton.
[Foreign Language]
[Interpreted] About the second question, the company's 14th 5-year plan have just that our low carbon clean energy proportion will be around 45% of our total capacity. So the company are striving to add 40 gigawatts of renewable energy during the 5 years. In the first 2 years, our 14th 5-year plan affected by the pandemic and the material supply, the company hasn't had a enough capacity added as expected. However, in the last 2 years in the 14th 5-year with the pandemic ended and the renewable energy acceleration in the 14th 5-year plan, we think in the last 2 years will add 10 gigawatts each year. About the resources obtaining the company have enforcement in the development of renewable energy. In 2022, the company have wind and solar capacity that being approved by the government amounted to 36 gigawatts. The following years, the company will continue to obtain new resources and have our on-site construction and as the profitability be our priority, the company will accelerate our construction and strive to achieve our target.
[Foreign Language]
[Interpreted] About the company debt asset ratio, the company is striving for to maintain appropriate debt to asset ratio and wisely use the gearing to help increase our profit. And in the first quarter, the company's debt asset ratio has dropped by 3.52% to 71.3%. The company will take following measures to help with our debt-to-asset ratio: First is to improve our operating results to increase our inner accumulation. In a normal operating year, the company will have CNY 30 billion to CNY 40 billion of operating cash inflow. And second, the company will study into our refinancing needs, keeping close track about the government policy and research into the market's trend. According to the company's refinancing needs, the company will have control of our debt-to-asset ratio.
[Foreign Language] The next question comes from [indiscernible] of [ Changan Securities ].
[Foreign Language] I have 2 questions first about the coal price and the coal inventories. Could you please tell us the inventory of the company and the inventory days. And second, about our order rate because it's related to the heat value. So could you please provide us with the heat value of the long-term contract coal and what was the year-on-year change?
[Foreign Language]
[Interpreted] Up until yesterday, the company's coal inventory was 11.85 million tons, increasing by 23.2% compared to the same period last year and inventory days was 24 days. In the first quarter, the heat value of the company purchased coal was 4,281 kcal. It has a 6.22% decrease compared to the same period last year.
[Foreign Language] The next question comes from [ Eric of SBS International ].
[Foreign Language]
[Interpreted] I have 2 questions. First, what is the standard coal price of coal and what was the year-on-year change and quarter-on-quarter change. Second, about the coal supply, which was the percentage of our coal procurement that from the long-term contract and from our imported coal?
[Foreign Language]
[Interpreted] The standard coal price in the fourth quarter for our coal-fired units was CNY 1,132 per ton. It has CNY 89 per ton decrease compared to the same period last year. It has a CNY 37 per ton decrease comparing to the fourth quarter last year. In the first quarter, the company's long-term contract procurement accounts for about 76% of our domestic demand and we have purchased 15.27 million tons of long-term contract coal. The standard coal price of 2022 was CNY 1,205 per ton.
The next question comes from [indiscernible].
[Foreign Language]
[Interpreted] My first question about the breakeven point for our thermal sector.
[Foreign Language]
[Interpreted] The breakeven standard coal price in the first quarter calculated using numbers of the first quarter was CNY 1,129.
[Foreign Language]
[Interpreted] What was the proportion of our long-term contract coal that was in line with government regulated CNY 570 to CNY 770 price range.
[Foreign Language]
[Interpreted] First, let me clarify that our rate in the first quarter was 76%. In the -- all those long-term contracts, we have procured, 60% is seaborne coal, and they are basically in line with the government regulated price range. For our inland coal power, they are also in line with the provincial government regulated price range. The imported coal have a local price of CNY 766 per ton and the local price for the coal purchase from open market was CNY 814 per ton.
[Foreign Language] The next question comes from Wu Jie of Haitong Securities.
[Foreign Language]
[Interpreted] First, could you please provide us with the coal consumption rate in the fourth quarter for our electricity sector and our heat supply sector? Second, could you please provide us the standard coal price in March?
[Foreign Language]
[Interpreted] So coal consumption rate in the first quarter was CNY 275.36 per kilowatt hour. It maintained the same level compared to the last year. Sorry, we don't have the number to each month of standard coal price. Well, we haven't got the go-consumption rate for our heat supply sector, we'll give you after the meeting.
[Foreign Language]
[Interpreted] Could you please give us the coverage ratio of long-term contract coal.
[Foreign Language]
[Interpreted] The company has signed 149.78 million tons of long-term contract coal. The coverage ratio was 94.8%, which is the total amount paid to our long-term contract coal purchased in the first quarter. The 15.27 million tons of coal is the number for our imported coal in the first quarter. The company has purchased 27.6 million tons of long-term contract code with an average price -- local price of CNY 694.61 per ton.
[Foreign Language] The next question comes from [indiscernible] of [indiscernible] Capital.
[Foreign Language]
[Interpreted] As the company have said the heat value has decreased by 6%, does that mean to generate the same amount of electricity, we need 6% more volume of coal. It's roughly what you have understand. However, the coal consumption rate may vary when we have different heat value. So if the units have higher efficiency then can we understand that we don't need that much volume of coal. For our thermal units, if the coal have the design heat value, then the operation will have the -- will reach the best.
[Foreign Language]
[Interpreted] The company will add 10 gigawatts each year in the last 2 years in 14th 5-year plan. Could you please provide us the breakdown to wind power and solar power. And could you give us the number of the capacity that put on to the grid in 2022?
[Foreign Language]
[Interpreted] About 10 gigawatts capacity add in the last 2 years in 14th 5-year plan. We don't have a specific breakdown for the proportion of solar and wind. However, considered from the resource obtaining, 70% is solar and 30% is wind. In 2022, the company add 3.09 gigawatts of wind and 2.93 gigawatts of solar. That's because the company may have limited resource in the short term or if it's in the long run, there will be still -- will -- there still be another resources for our wind project. The government has promoted the distributed form of solar projects, and that may have abundance of resources, maybe for the centralized wind power, it has limited resources comparing to the solar. However, for our companies, both wind power and solar power, we will be our future target. We don't have specific differentiate between those 2 power resources.
[Foreign Language] The next question comes Vento of JPMorgan.
[Foreign Language]
[Interpreted] I have 3 questions. First, which is the unit fuel cost for coal sector and for our gas sector. Second, about the tariff contract. Could you please break down -- break the contract down to the annual settled, monthly settled and quarterly settled? And third, in the first -- what is the market-based tariff for renewable energy and what was the market-based volume for the renewable energy?
[Foreign Language]
First about the unit fuel costs in the first quarter, the domestic power plants unit fuel cost of coal sector were CNY 3,303 per megawatt hour. It decreased by CNY 25.5 per megawatt hour. The unit fuel cost of gas sector was CNY 425 per megawatt hour, increasing by CNY 22.6 per megawatt hour. First, let me give you the proportion of market-based volume. That is only for your reference. The annually settled contracts account for 67% of our total market-based volume and monthly contract accounts for 30%. That includes the great companies as a power agency and for other volume is from the spot market. The market-based power generation for wind -- wind sector was 2.218 billion kilowatt hours. It accounts for 27.7% of our total wind power and the average price was CNY 484.7 per megawatt dollar. For solar sector, the market-based volume was 377 million-kilowatt hour. It accounts for 19.98% of solar power generation with an average price of CNY 506.39 per megawatt hour. So market-based wind tariff has CNY 22 per megawatt decrease. And for solar sector, it has a CNY 16 per megawatt increase. That's mainly because of the policy of the provincial government. We have announced profit breakdown in the -- our announcement, that net profit was profit before tax. We have just said the number was a profit attributable to equityholders.
Due to time constraints, we invite the last investor to ask questions. It comes from some question of [indiscernible] and Securities.
[Foreign Language]
[Interpreted] I have three questions. First is the CNY 1,132 standard coal price tax excluded. And second, about the tariff of what is the tariff of coal-fired units? And what was the year-on-year change? And which provinces have higher tariff hike? And third, what is the company's plan of new added capacity in the second quarter?
[Foreign Language]
[Foreign Language] Standard coal price is from the financial side and it's tax excluded. The tariff hike, hiked the most in province like Guangdong, Chongqing, Fujian, Hunan, that was because in the first quarter last year, they haven't implemented the 20% tariff pack. In the second quarter, the company aim to add 1,235 megawatts of solar project.
[Interpreted] Thank you so much for all of the questions and participation today. Finally, Ms. Huang would like to give further summary.
[Foreign Language]
[Interpreted] Thank you for participating in the conference call. Thank you for your continued support. Here, we come to the end of today's conference call. Please contact our IR department if you have any further questions. Thank you.
[Interpreted] Thanks again for your attendance of the conference call regarding the first quarter results announcement of 2023. We are looking forward to meeting with all of you in our next results announcement. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]