A Brief Analysis of Investment Situation of Electrical Equipment Industry in China in Recent Years

In 2012, the national grid investment will continue to grow. State Grid Corporation of China held an annual working meeting on January 5th. The meeting looked forward to and deployed the work for 2012. The meeting proposed that in 2012, we must continue to accelerate the construction of demonstration projects for urban distribution networks and the construction and upgrading of rural power grids; and for the first time we must strengthen the investment management of distribution networks and increase the intensity of the transformation of low- and medium-voltage distribution networks. In 2011, the State Grid completed a fixed asset investment of 333.3 billion yuan, a year-on-year increase of 13.5%, of which the power grid investment was 301.9 billion yuan; in 2012 the State Grid Corporation of China planned to complete a fixed asset investment of 336.2 billion yuan, of which the power grid investment was 309.7 billion yuan, compared with 2011. Than to continue to grow.

UHV line construction will accelerate. Due to China's energy distribution and its imbalance, the imbalance in energy consumption requires UHV construction. According to previous national grid planning, during the 12th Five-Year Plan period, the state will invest more than 500 billion yuan to build a “three vertical and three horizontal” UHV AC backbone grid and 11 UHV DC transmission projects. In addition, the deputy general manager of the State Grid Corporation of China stated that the company will plan to construct the highest voltage transmission line in China during the “Twelfth Five-Year Plan” period - a plus or minus 1,100 kV high voltage transmission project. At present, the feasibility study report for the project has been basically completed. This is also one of the 11 DC transmission lines in the “three vertical and three horizontal” UHV lines previously planned by the State Grid Corporation of China. It can be seen that UHV construction has gradually entered a peak period, so UHV equipment manufacturers will significantly benefit from the acceleration of UHV construction.

State Grid integration kicked off. At present, the State Grid Institute of Electric Power under the State Grid Corporation of China and the China Academy of Electric Power both have research and industrial companies. The acquisition of the shares of Jianxin Electric by the State Grid Power Institute in November last year enabled the State Grid Corporation to fully deploy the transmission grid and distribution network, which in turn drove the state-owned assets of the State Grid Corporation. State Grid Corporation of China proposed this year’s work meeting that it will “administer the classification management and assessment of scientific research and industry” to form three research institutes of the Chinese Academy of Electric Power, the Institute of Economics and Technology, and the Energy Research Institute; and form the State Grid Institute of Electric Power, CLP equipment and other industrial groups. Future listed companies still have consolidation expectations.