汇丰银行-china gas utilities official policy confirms our positive stance-20170623-hsbc

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1、23June2017ChinaGasUtilitiesEQUITIESUTILITIESOfficialpolicyconfirmsourpositivestanceChinaReturncappolicyisofficial,clearingmarketmisperceptionsEvanLi*HeadofUtilities&AlternativeEnergyResearch,APACWestaypositiveastermsaremorerelaxedthanexpectationTheHongkongandShanghaiBanking

2、CorporationLimitedevan.m.h.li@hsbc.com.hk+85229966619WeseeTowngasChina(Buy)andBeijingEnterprises(Buy)SimonFang*asmostdefensive;wealsolikeENN’s(Buy)transparencyAssociateTheHongkongandShanghaiBankingCorporationLimitedsimon.w.fang@hsbc.com.hkPolicyonregulatedreturnisclarified:TheNa

3、tionalDevelopmentandReform+85229149973Commission(NDRC)hasofficiallypublishedanopinionpaperrelatingtoaregulatedrateofreturnfornaturalgasdistributorsinthedownstream.Consistentwithourview,*Employedbyanon-USaffiliateofHSBCSecurities(USA)Inc,andisnotregistered/qualifiedpursuanttoFINRA

4、regulationstermsaremorerelaxedthanwhatthemarketpreviouslyspeculated.LocalgovernmenttogatherdataforsettingpricesforeachlocationbyJune2018.What’sdifferent?ROAcapis7%,not6%.Consistentwithourexpectations,thegovernmentissettingaROAcapof7%overeffectiveassetsrelatingtogasdistribution,v

5、ersusa6%aspreviouslyspeculatedbythemarket.Nomentionofutilisationcriteria.Basedonpreviousspeculationbymediareports,thereturncapof6%wouldbeenforcedwhentheutilisationratereaches60%.Theofficialnoticedoesnotmentionanycriteriarelatingtoutilisationrate.Besides,webelievesettingafixeduti

6、lisationrequirementovergasdistributioninthedownstreamislessrelevantversuslongdistancetransmissionpipelines.Transmissionlossrequiredat4-5%,notaflat4%:Transmissionlosshastobecontrolledatorbelow5%forthefirstthreeyears,followedby4%thereafter.Previously,themarketexpectedaflat4%throug

7、houtthewholetenure.Connectionfeeappearsnottobeincludedintheregulation:Althoughnotdirectlyaddressed,lookslikeconnectionfeeswouldnotbeincludedinthecalculationofthe7%ROAcap.BasedontheofficialnoticeandpressconferencescriptsbetweenNDRCandreporterspublishedbyXinhuaNews(22June),pricereg

8、ulationappliesonthegasdistribution,while