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Today, let's talk about the highlights and changes in the nuclear power business model.
1. Conservative depreciation, obvious profit release in the later stage
The life cycle of a nuclear power project is divided into two phases: the construction period and the operation period. Among them, the construction period is generally 5 years, the design life of the second-generation unit is 40 years, and the design life of the third-generation unit is 60 years. The operation period consists of three stages, namely the repayment of principal and interest + depreciation period, the single depreciation period after the end of the repayment of principal and interest, and the profit release period after the completion of depreciation. The loan term for nuclear power projects is usually 15 years, the comprehensive average depreciation life of the second-generation units is 25 years, and the comprehensive depreciation period of the third-generation units is 35 years. Since the company adopts conservative depreciation, the depreciation period is much shorter than the actual operating life, and after the depreciation is completed, the power generation cost will be significantly reduced, the profit will be released, and the cash flow will be continued. The profit release period after the depreciation of the second-generation unit is 15 years, and the third-generation unit is 25 years.
In addition to the cash cow, nuclear power and hydropower have in common the time difference between the depreciation period in the financial statements and the actual use period of the equipment. The depreciation life of hydropower is about 40 years, but the actual service life is more than 100 years; The average depreciation life of nuclear power is around 30 years, the design service life is 40-60 years, and it can often reach 80 years or even longer after overhaul. After the depreciation of the equipment expires, the equipment is normal power generation, but there is no depreciation cost, and all that is left is book profit.
2. The cost structure of nuclear power is stable
From 2018 to 2022, the depreciation of fixed assets in China accounted for 38-41% of the total cost of nuclear power, the proportion of nuclear fuel and other materials cost was stable at 21-23%, and the proportion of operation and maintenance expenses was stable at 13-15%, with a very fixed structure.
In order to ensure the stability of raw materials, the company has signed a 10-year long-term agreement model for the entire nuclear fuel chain, and the procurement of this year is linked to the spot and long-term agreements in the previous period, and short-term uranium price fluctuations have little impact on the company. The company's controlling shareholder, China National Nuclear Corporation, has the only nuclear fuel manufacturing capacity in China, and the group's natural uranium reserves have ranked second in the world for two consecutive years.
3. Low cost and life extension
In 2021, the first second-generation nuclear power unit of China's nuclear power, Qinshan No. 1 CP300 unit, was successfully extended, extending its life span from 30 years to 50 years. At present, in addition to Qinshan 1, the company also has 18 second-generation units in operation, mostly using CP600 CP1000 models, which are safer and more advanced than CP300 technology, and have successfully extended their life in France and the United States.
4. ROE is expected to double under long-term operation
From the perspective of the dismantling of the subsidiaries of China Nuclear Power, the ROE of the subsidiaries that have entered the stable operation period is about 20%, which is significantly higher than the company's overall ROE of 11%. The main reason is that the operation stage of the project company is inconsistent, and some immature projects have lowered the overall ROE of the listed company. For example, Qinshan No. 1 Core, Qinshan No. 2 Nuclear Power Plant and Qinshan No. 3 Nuclear Power Plant have entered a period of stable operation, and their ROE level has remained stable at about 20%; Tianwan Nuclear Power and Fuqing Nuclear Power have both put new units into operation in the past three years, and the ROE has also maintained an upward trend year by year. Due to the high cost of Sanmen Nuclear Power and Hainan Nuclear Power, the current ROE level is significantly lower than that of other units.
Under long-term operation, ROE is expected to grow significantly or even double!
5. Domestic nuclear power accounts for only about 5%.
In 2023, the cumulative power generation in the country will be 89,090900 million kilowatt hours, and the cumulative power generation of operating nuclear power units is 4,3325 billion kWh,It accounts for 4 percent of the country's cumulative power generation86%。
A few days ago, the European Statistical Office (Eurostat) released data saying that in 2022, the total nuclear power generation capacity of the 13 nuclear power countries in the European Union will be 609255TWh, a decrease of 16 from 20217%, the lowest level since 1990, but nuclear power in the regional energy mixThe proportion still reached 218%。
Eurostat pointed out that the main reason for the decline in nuclear power generation is the shutdown and overhaul of several nuclear power units by France, the largest producer. France has 56 nuclear power units, which generate about half of the EU's total nuclear power generation. In 2022, France generated 379 nuclear electricity361TWh, down 22% from 2021.
In 2021, thermal power generation accounted for 6219%，Nuclear power is 1891%, hydropower is 62%。
6. Priority consumption of nuclear power generation
In February 2017, the Interim Measures for Ensuring the Safe Consumption of Nuclear Power were issued, which pointed out that the guaranteed consumption of nuclear power should follow the basic principles of "ensuring safety, giving priority to grid access, ensuring electricity and balancing interests".Arrange the power generation of nuclear power units in the order of priority guarantee of the first category.
In June 2019, the "Notice on Comprehensively Liberalizing the Power Generation and Consumption Plan for Commercial Electricity Users" pointed out:The power generation of nuclear power units shall be included in the priority power generation plan, and the work of ensuring consumption shall be done in accordance with the relevant work requirements for the management of the priority power generation and priority purchase plan。 Encourage commercial power users to carry out market-oriented transactions with clean energy such as nuclear power, hydropower, wind power, and solar power generation, and consume unplanned additional clean energy power。
7. The approval of nuclear power has been accelerated
In 2011, the Fukushima nuclear accident in Japan required "strict approval of new nuclear power projects." We should step up the preparation of nuclear safety plans, adjust and improve the medium- and long-term plans for nuclear power development, and suspend the examination and approval of nuclear power projects, including those that carry out preliminary work, until the nuclear safety plan is approved. "The approval of nuclear power units has stalled.
In 2012, the "Medium and Long-term Development Plan for Nuclear Power (2011-2020)" was issued, proposing that "during the 12th Five-Year Plan period, only a few fully demonstrated nuclear power project sites will be arranged along the coast, and no inland nuclear power projects will be arranged."
After the approval of 8 nuclear power units in 2015, the industry ushered in three consecutive years of "zero approval".
In 2019, nuclear power was approved for recovery, and the 2021 work report mentioned "active and orderly development of nuclear power under the premise of ensuring safety", which is the first time in the past decade that the first work report has used "positive" to describe the development of nuclear power.
In September 2022, the China Nuclear Energy Industry Association released the "China's Nuclear Energy Development and Outlook (2022)", which is expected to maintain the pace of approval and start construction of 6-8 nuclear power units per year during the "14th Five-Year Plan" period.
The business profit is high, the growth rate is acceptable, and there is a stable (and will continue to increase in the future) cash dividends, and the world's good business is nothing more than that!
Well, that's it for the information and sharing of the nuclear power business model, and we will continue to track the latest developments in the future.
Good luck everyday! Nuclear power
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Remember! All statements in this article are for discussion purposes only and should not be used as the basis for any investment decisions. It is only a collation and sharing of information, not a stock recommendation! **There are risks, and investment needs to be cautious! If you trade exactly according to the ideas provided in this article, you do so at your own risk!