In-depth Analysis of the Impact of Intensified Competition in Guangdong Province's Annual Long-Term Power Purchase Agreement (PPA) Prices on Power Enterprises

As a pioneer in China’s power marketization reform, Guangdong Province’s 2025 annual long-term PPA market has shown an unprecedented competitive pattern. The province’s annual electricity consumption reaches 912.1 billion kWh, of which 68% is market-oriented transaction electricity, with electricity sales companies accounting for about 10% of the agency share. A key recent change in the market is that electricity sales companies’ quotations have broken through the regulatory bottom line of 0.372 yuan/kWh, reflecting the intensity of market competition.

is the most important institutional change in the current power market. According to regulatory documents, the wholesale-retail spread income of electricity sales companies is limited to within 0.012 yuan/kWh, and the excess part must be shared with users at a ratio of 1:9. This policy has also formed a trend nationwide, with regions such as Henan, Shaanxi, Anhui, Jiangxi, and Sichuan introducing similar price-limiting policies. However, Guangdong’s 1:9 sharing ratio is significantly higher than the “2:8” or “5:5” ratios in other regions, which more reflects the policy orientation of tilting towards users [1].

As can be seen from the chart, after the implementation of regulatory policies, the actual retained income of electricity sales companies will be significantly compressed, which fundamentally changes the business model of traditional electricity sales companies.

As the power generation type with the highest marginal cost, thermal power enterprises bear the brunt of low-price competition. However, analysis shows that the profitability of thermal power enterprises has been verified, mainly due to the following reasons:

1. Cost-side Improvement
   : The strength of coal long-term agreement supply guarantee has increased, and the actual performance rate of thermal coal long-term agreements has risen, making the cost side of coal-fired power enterprises more controllable [1]
2. Capacity Value Reassessment
   : Under the tense situation of power supply and demand contradictions, the peak value of coal-fired power is highlighted, and the capacity electricity price mechanism has been officially introduced, clarifying the cornerstone status of coal-fired power [1]
3. Market Position Consolidation
   : As an important support for system regulation, the indispensability of thermal power in the construction of new power systems has increased

As a power source with lower marginal cost, nuclear power enterprises face greater impact in low-price competition:

1. Profit Margin Compression
   : The marginal cost of nuclear power is about 0.35 yuan/kWh, which is close to the current market long-term agreement price, severely squeezing the profit margin
2. Fixed Cost Pressure
   : Nuclear power construction requires huge investment and has high fixed costs, which need relatively stable electricity prices to ensure recovery
3. Strong Policy Dependence
   : Nuclear power revenue is highly dependent on policy pricing mechanisms, and market-oriented pricing poses challenges to it

Although hydropower enterprises have the lowest marginal cost (about 0.29 yuan/kWh), they also face challenges in the current environment:

1. Dry Season Risk
   : Hydropower output is restricted by natural conditions, and in the dry season, it may be necessary to purchase electricity at high prices to fulfill contracts
2. Dilution of Competitive Advantage
   : With the intensification of market competition, the cost advantage of hydropower has been diluted to a certain extent
3. Seasonal Fluctuations
   : The seasonal characteristics of hydropower do not fully match the peaks and valleys of power demand, affecting overall revenue

Power enterprises are undergoing a transformation from traditional power generation enterprises to integrated energy service providers:

1. Shift from Spread Acquisition to Service Value
   : The profit model relying solely on electricity price spreads is unsustainable; enterprises need to shift to providing auxiliary services such as peak shaving, frequency modulation, and standby
2. Risk-Reward Ratio Reconstruction
   : The risk-reward ratio of arbitrage for electricity sales companies has been greatly compressed, and one-way betting on generation-sales price spreads means great risk of electricity quantity-term mismatch [1]
3. Business Model Innovation
   : Power enterprises need to explore new profit growth points such as energy management, demand response, and energy storage services

Based on current market trends, the financial indicators of power enterprises may undergo the following changes:

1. Increased Gross Margin Volatility
   : Electricity price fluctuations directly affect gross margin; enterprises need to strengthen cost control and risk management
2. Improved Asset Turnover
   : Intensified market competition will prompt enterprises to improve asset utilization efficiency
3. Cash Flow Differentiation
   : The cash flow status of different power generation types will show obvious differentiation; thermal power is relatively stable, while clean energy has greater volatility

The investment value of power enterprises is undergoing reassessment:

1. Shift from Static to Dynamic Valuation
   : Traditional valuation methods based on historical profits need to be adjusted to dynamic valuations that consider the prospects of marketization reform
2. Risk Premium Adjustment
   : With increased market uncertainty, the risk premium required by investors has increased accordingly
3. Growth Reassessment
   : In the construction of new power systems, enterprises with technological innovation and business model innovation capabilities will obtain valuation premiums

Based on the current market environment, investment opportunities for different types of power enterprises have shown obvious differentiation:

1. National Coal-Fired Power Leaders
   : Such as Guodian Power, Huaneng International, Huadian International, etc., which have scale and cost advantages in marketization reform [1]
2. Regional Leading Companies
   : Such as Yue Power A and other enterprises in regions with tight power supply, which benefit from regional power supply and demand patterns [1]
3. Clean Energy Operators
   : Although facing short-term profit pressure, they will benefit from the energy transition trend in the long run
4. Technology Companies
   : Coal-fired power equipment manufacturers and flexibility transformation technology companies are expected to benefit from the start of a new cycle for coal-fired power [1]

1. Gradual Exit of Vicious Bidding
   : The profit-sharing mechanism will guide electricity sales companies and generation/consumption parties to form reasonable prices, and vicious bidding is expected to gradually exit the market [1]
2. Stabilization of Electricity Price Expectations
   : Policy guidance is expected to form stable electricity price expectations and reduce market volatility
3. Maturation of Business Models
   : The business model on the electricity sales side will gradually change towards a more sustainable direction

1. Focus on Enterprises with Cost Advantages
   : In a low-price competition environment, enterprises with cost control capabilities will have more competitive advantages
2. Layout Technology Innovation Companies
   : Invest in enterprises in technology innovation fields such as flexibility transformation, energy storage, and smart grids
3. Attach Importance to Policy Sensitivity
   : Pay close attention to the trends of power marketization reform policies and adjust investment strategies in a timely manner
4. Diversify Investment Risks
   : Given the high market uncertainty, it is recommended to diversify investments across different types of power enterprises

The intensified competition in Guangdong Province’s annual long-term PPA prices reflects the in-depth advancement of power marketization reform. Although it puts pressure on the profitability of power enterprises in the short term, it will promote the healthy development and value reassessment of the power industry in the long run. Investors need to re-examine the investment value of power enterprises, focusing on their cost control capabilities, technological innovation capabilities, and business model adaptability. Under policy guidance, the power market is expected to gradually form a more reasonable price mechanism and competitive pattern, creating long-term investment value for power enterprises with core competitiveness.

[1] Jinling API Data
[2] Phoenix Finance - “Instantly Locked at Limit Up, Document No.136, Completely Exploded?” (https://finance.ifeng.com/c/8omTtbBNBFG)
[3] Eastmoney.com - “Mechanism Electricity Prices of 16 Provinces Released: Lowest 0.19 Yuan, Highest 0.41 Yuan, Why Is the Gap So Wide?” (https://caifuhao.eastmoney.com/news/20251206153837193943900)
[4] Sina Finance - “[Cinda Energy] Power and Natural Gas Weekly Report: Mechanism Electricity Prices of Shaanxi and Liaoning Released” (https://finance.sina.com.cn/stock/relnews/hk/2025-12-08/doc-infzzuin3854317.shtml)