EB SECURITIES: the signing of the Guangdong electricity price contract is in line with expectations, and it is expected that the annual long-term electricity prices for other provinces in 2026 will be relatively stable.

EB SECURITIES published a research report stating that the results of the power trading in Guangdong Province in 2026 have been finalized. The bank believes that the signed electricity quantity and price results in Guangdong are in line with expectations, and profits of Guangdong thermal power units are expected to be under pressure, but the spot market is expected to provide performance growth. Looking at other provinces, the bank judges that the areas where electricity spot markets have not settled continuously, as well as Beijing and Shanghai with relatively stable monthly long-term contract electricity prices, are expected to have relatively stable long-term contract electricity prices in 2026. The main viewpoints of EB SECURITIES are as follows: - The electricity quantity and price of thermal power are close to a 20% decline, while the comprehensive price of green electricity is higher than the regulated price. The average transaction price is 372.14 cents/kilowatt-hour, a year-on-year decrease of -5.03%, essentially a market reference price decrease of 20%. The annual bilateral negotiated transaction price is 372.14 cents/kilowatt-hour, a year-on-year decrease of -5.03%, and the transaction volume accounts for 99.87% of the total annual transaction volume. The green electricity negotiated transaction price is 372.21 cents/kilowatt-hour, plus an environmental premium of 4.93 cents/kilowatt-hour, corresponding to a comprehensive price of 377.14 cents/kilowatt-hour, a year-on-year decrease of -3.88%; but higher than the regulated price of 360 cents/kilowatt-hour. The green electricity transaction volume in 2026 is expected to increase by +17.74% compared to 2025 (the transaction volume in 2026 is 47.79 billion kilowatt-hours, compared to 40.59 billion kilowatt-hours in 2025). - The capacity price is expected to increase by 0.016 yuan/kilowatt-hour year-on-year, while the comprehensive on-grid electricity price is expected to remain basically the same year-on-year. Starting from January 2026, the capacity subsidy for coal-fired power plants in Guangdong has been increased from the previous 100 yuan/kilowatt to 165 yuan/kilowatt per year. Referring to the 3950 hours of coal-fired power plant utilization hours in Guangdong in 2024, the corresponding capacity subsidy is 0.042 yuan/kilowatt-hour, an increase of 0.016 yuan/kilowatt-hour year-on-year. The corresponding comprehensive electricity price (capacity + quantity) for coal-fired power units in Guangdong in 2026 is 0.414 yuan/kilowatt-hour, a year-on-year decrease of -0.78% (corresponding to 3 cents/kilowatt-hour), basically remaining the same year-on-year. - The loose electricity supply and demand in Guangdong in 2026 is expected to continue, with the spot market likely to provide performance growth. Looking back at history, the average price of the spot market and monthly long-term contract prices in 2025 were consistently lower than the annual long-term contract average price. The real-time market and day-ahead market spot market average price from January to November 2025 was lower than the 2025 long-term contract average price of 391.86 yuan/MWh; the comprehensive price of the monthly medium and long-term trades was also lower than the annual long-term contract price level of the year. In 2025, there was a loose electricity supply and demand in Guangdong; considering there is still an increase in installed capacity in Guangdong in 2026, the bank predicts that the electricity supply and demand situation in 2026 will continue the loose pattern of 2025. With the large-scale entry of green electricity into the market in Guangdong, the spot market electricity prices are expected to have greater fluctuations. 1) Electricity operators may profit through flexible strategies by taking advantage of spot and long-term contract electricity price differentials; 2) The large-scale entry of green electricity will further highlight the stabilizing role of thermal power in the grid, and its functional premium is expected to be demonstrated through the spot market. - Risk analysis: Decline in end-user electricity demand; slower than expected progress in the transformation to new energy sources; long-term contract implementation of coal prices lower than expected; significant increase in wind and solar installation costs.