Overcapacity in thermal power construction

Recently, the China Electric Power Construction Enterprise Association released the “2013 Annual Report of the Electric Power Construction Industry”. The following is the report and interpretation of the development status and important news events of China's electric power construction industry summarized in the report, focusing on the electric power construction industry. And the existing problems of construction companies, and find a feasible path for enterprises to escape difficulties.

Thermal power construction excess capacity up to 1/3

As a typical market-driven industry, as the investment rate decreases year by year, the thermal power construction market has also suffered a certain impact. In recent years, the thermal power construction market has gradually shrunk and the issue of excess construction capacity has become increasingly severe. According to statistics, the highest year for China's thermal power construction companies to complete the number and capacity of units is 2010. In that year, the number of production units reached 201, and the production capacity was 67.8 million kilowatts. In 2012, the number of production units dropped to 148 units, production capacity dropped to 50.1 million kilowatts, production capacity decreased by 26.2% compared to 2010, and unit numbers decreased by 26.4%. In the past 2013, production capacity dropped to 36.5 million kilowatts. The report pointed out that last year, China's thermal power construction capacity has reached 1/3.

Earlier this year, the National Energy Administration once again clearly stated that it strictly controlled coal-fired power projects in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, and the Pearl River Delta, and prohibits the construction of self-provided coal-fired power plants in new construction projects. Except cogeneration, the approval of new coal-fired power projects is prohibited. . In the future, as China's energy structure continues to adjust and under the national air pollution prevention strategy, the proportion of installed clean energy will continue to increase, and the country’s control over the total amount of coal consumption and the use of restrictions will also continue to reduce the proportion of thermal power. The report predicts that: "In 2014, the newly installed capacity of China's thermal power generation capacity will drop to 30 million kilowatts, and the excess construction capacity can reach 1/2." Like thermal power, hydropower, transmission and substation construction also have different levels of excess capacity. problem.

Overall asset-liability ratio is high

The report pointed out that the domestic thermal power construction market tends to be saturated, which has led to a decline in the economic performance of many thermal power construction companies, which has restricted the survival and development of enterprises. Among the power-construction companies with a high overall debt ratio, the debt-to-equity ratio of thermal power construction companies remains high, and there is a tendency for further deterioration.

According to the analysis of the report, the external factors affecting the economic efficiency of enterprises mainly include: non-standard bidding in the electricity construction market, difficulty in settlement of the project, and three major problems in the application of the electricity quota. Among them, difficulties in settlement and arrears of project funds are the chronic problems of delays in the construction of power projects, resulting in increased accumulation of receivables in power construction companies year after year, which has the greatest negative impact on the economic efficiency of enterprises.

At the same time, the company itself also has certain problems, such as the aging of the workforce, serious brain drain, and aging equipment. The above-mentioned asset-liability ratio has remained high for a long period of time, which has led to a series of internal contradictions and problems in the enterprise. This has fundamentally constrained the refinement of corporate management and the improvement of core competitiveness.

Therefore, in the face of shrinking domestic thermal power construction market, and in order to survive and develop, it is imperative for thermal power construction companies to accelerate their transformation, integration, and development of overseas markets.

Integrated industrial chain expands development space

Despite many problems, the development situation of power construction companies is getting better after the separation of main and auxiliary power grid enterprises in September 2011. Under the impetus of the two major power construction groups to build an integrated industrial chain and carry out coordinated general contracting and other active policies, the survival of thermal power construction companies is gradually being improved.

Since 2008, more and more power construction companies have “goed out” and have access to the advanced engineering management model of EPC in overseas projects, and have gradually accumulated experience. After the separation of main power and auxiliary power grid companies, the EPC contracting model has ushered in a new opportunity for development under the impetus of the newly established two major power construction groups—collection of electricity and energy planning consulting, survey and design, project contracting, and equipment manufacturing. Investment and operation as one of the engineering synergies will open up more space for development of thermal power construction companies.

At the same time, under the guidance of the Group's transformation and upgrading strategy, the power construction companies are striving to achieve business transformation and industrial upgrading, and are actively moving toward the non-electric sector, from a single power engineering construction to a related diversified “big civil engineering” project construction; A single contractor has transformed from a contractor to an investor; it has upgraded from a traditional low-end production and operation enterprise to a general contracting company with a complete industrial chain. At present, many electric construction companies have expanded their businesses to non-electricity industries, such as energy conservation and environmental protection, municipal roads and bridges, port waterways, and telecommunications projects. Moreover, the two major power generation group's international development strategy has also achieved practical results.

Understand Market Demand and Pay Close Attention to Market Development

The report pointed out that in the face of changes in the current domestic and international market conditions, as the state-dominated power construction and construction enterprises should focus on solving the following problems: First, companies should pay close attention to domestic and international power construction markets and related non-electric markets. The information will always regard the market as the top priority for the development of enterprises and formulate medium and long-term development plans. Secondly, we must pay attention to market decisions, make good projects accessible, improve the quality of market development, strengthen the risk management of market bidding, and eliminate loss items from the source. Third, we must address the fact that the power construction market has an excess capacity for construction. While striving to expand the non-electric sector market and implement the “going out” strategy, we must take measures to effectively absorb excess capacity so that the company’s survival and development will meet the needs of domestic and foreign markets. adapt. Fourth, we must strengthen the use of technological innovation as a driving force to form the company's core capabilities in engineering quality and corporate branding, and continue to improve the company's core competitiveness. Fifth, we must give full play to the integration advantages of the two major power construction group industrial chains, strengthen the integration of core competences, and reintegrate power construction companies and industrial chains to realize the innovation and upgrading of institutional mechanisms and management models. Sixth, it is necessary to strengthen the construction of high-end talents in the power construction market, complete the transformation from the project subcontracting model to system integration and supporting services, complete the transition from project management to general contracting direction, and adapt to the needs of future power development market economic development.