Analysis of Investment Value of Thermal Power Enterprises Under Electricity Marketization Reform in 2026

In 2026, the electricity market presents a new pattern of “shrinking annual long-term contracts and expanding monthly bidding”: Guangdong’s annual contracted electricity volume is only 359.4 billion kWh, lower than the expected 420 billion; Hubei’s is only 86.5 billion. This reflects the new rule where annual long-term contracts, which originally accounted for 80% of the total, have been compressed to 60%. Power sales companies are shifting more to monthly centralized bidding and spot markets to avoid deviation assessment and price fluctuation risks [4]. After the withdrawal of grid agent power purchase, a large number of power sales companies have flooded into the monthly bidding market, especially in reform-leading provinces such as Guangdong and Jiangsu. The trading system of annual long-term contracts + monthly bidding + spot linkage has basically been completed. New energy sources still tend to lock in annual long-term contracts due to zero marginal cost, while thermal power undertakes more spot and regulation tasks [3].

At the same time, the entire retail end has seen suicidal price drops in quotations due to the mixing of inexperienced entities and the “low-price-only theory”. The decline in average bidding prices in Guangdong, Jiangsu and other places has led to an increase in the risk of losses for some power sales companies. “Price wars below cost” have become the norm, and the price discovery mechanism has failed in the short term [2]. This high-frequency price game on the power sales side brings profit volatility and cash flow pressure to thermal power suppliers who mainly rely on medium and long-term contracts within the year.

1. Increasing Volatility of Electricity Revenue
   : Thermal power enterprises that have long relied on annual long-term contracts to lock in electricity volume and prices now have to face a market where electricity prices change rapidly every month. Monthly bidding prices are strongly affected by coal prices, renewable power output, and load fluctuations. Without accurate load forecasting and risk hedging capabilities, profits are easily squeezed in low-price bidding, and profit elasticity decreases. Especially during the peak output periods of hydropower and nuclear power in the south, the utilization hours of thermal power are further compressed, and it may be difficult to cover fixed costs with electricity revenue alone [1].

2. Capacity Electricity Price Mechanism Becomes “Basic Salary”
   : The total capacity electricity fee in 2024 was 95 billion yuan. The 2026 mechanism requires thermal power to recover no less than 50% of fixed costs, which is expected to bring an additional fixed income of about 0.015 yuan per kWh, equivalent to pre-pricing the “supply guarantee and regulation” capabilities. Even if monthly electricity revenue declines, this mechanism can cover most of the depreciation and interest, making thermal power assets more inclined to “bond-like” stable returns, thereby supporting dividend strategies [1][5].

3. Regional Differentiation and Business Transformation Differences
   : The profit improvement of thermal power in North China and Central China is better than that in East China and South China, where the latter is significantly affected by ignition price differences and load structure. Leading central enterprises such as Huaneng and SPIC can rely on large-scale asset integration and coordinated profit from power sales + auxiliary services; local enterprises need to reduce the negative impact of price competition through value-added services such as energy storage and virtual power plants [1][3].

1. Shift from Cyclical Valuation to Stable Valuation
   : Coal-fired power leaders such as Huaneng International and Guodian Power have taken shareholder returns as the core anchor, raising the dividend ratio to 50%-70% and clarifying the bottom line of cash dividends. This “high dividend” feature combined with the bottom-line cash flow provided by capacity electricity prices allows them to maintain investment attractiveness even when the price-to-earnings ratio declines [1].

2. Valuation Elasticity Affected by Electricity Volume Fluctuations
   : The current market valuation of thermal power focuses more on “cash flow certainty” rather than short-term profit growth. Enterprises such as China Resources Power have a high ROE (over 20% in the first three quarters of 2025) in regions with tight supply and demand, so they will still obtain market premiums. In contrast, regional thermal power assets that rely on a high proportion of monthly bidding electricity and have no capacity electricity price support face greater valuation pressure.

3. Real-Time Quotations and Valuation Indicators
   : For example, Huaneng International’s current static P/E ratio is about 8.33 times and ROE is 10.25%, indicating that the market has repriced it as a “low volatility/high dividend” type valuation; Datang Power Generation’s P/E ratio is still in double digits, reflecting that profit volatility has not been fully absorbed by the market [0]. These indicators can serve as reference benchmarks for subsequent valuation models.

1. Allocation Logic
   : Prioritize thermal power enterprises with capacity electricity price advantages, strong power sales end integration capabilities, and energy storage/flexibility assets, such as operators with coal-power integration resources or existing capacity supply contracts. They are more likely to maintain cost control and cash flow stability amid monthly bidding fluctuations [5].

2. Risk Control
   : It is necessary to monitor whether price wars among power sales companies erode the bargaining power of power generators. If most bidding prices continue to be lower than the original cost of coal-fired power, thermal power enterprises must maintain profits by reducing hours or participating in auxiliary services. For enterprises without capacity electricity price subsidies and relying on a high proportion of monthly bidding, potential deviation penalties and default fees should be evaluated carefully.

3. Valuation Adjustment
   : When using cash flow discount valuation, capacity electricity fees and auxiliary service income can be regarded as “defensive” cash flows, while adding electricity price sensitivity analysis. Dividend commitments (such as Guodian Power’s 60% cash dividend commitment from 2025 to 2027) can serve as the lower limit of yield to boost investor confidence [1].

4. Industry Trends
   : Electricity marketization will continue to promote the differentiation of power sales companies. Leading enterprises will focus on the four-wheel drive of “long-term contracts + wholesale + spot + energy storage”, while mid-stream thermal power needs to strengthen the ability to “sell flexibility and capacity” in addition to “selling electricity volume”. Investors can pay attention to targets with flexibility transformation/energy storage supporting facilities, stable relationships with local power grids, and net debt optimization plans.

The transformation of thermal power enterprises from annual long-term contracts to monthly bidding will undoubtedly compress short-term profit volatility, but at the same time, a new valuation foundation can be established through the capacity electricity price mechanism, power sales end integration, and service expansion. It is recommended that investors re-evaluate thermal power targets using a three-dimensional framework of “cash flow stability + dividend sustainability + asset adjustment capability”. For more in-depth data models, single-enterprise sensitivity analysis, or industry comparison reports, you can consider enabling the

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[1] East Money “Thermal Power + Green Power + Hydropower + Nuclear Power: Core Companies with the Clearest Investment Direction in 2026” (https://caifuhao.eastmoney.com/news/20251222213449727083630)
[2] Low Carbon Network “2026 Electricity Retail Market Chaos Frequent, Supervision Takes Intensive Actions to Correct” (https://www.ditan.com/industry/elec/9248.html)
[3] Energy Development Network “Where is the Core Competitiveness of Power Sales Companies in 2026?” (https://www.nationalee.com/newsinfo/8852353.html)
[4] Xueqiu “The Beginning of Thermal Power Unit Transformation (2026 Electricity Trading Data)” (https://xueqiu.com/3203323063/367955738)
[5] East Money “Advantages of Coal-Power Integration of Meixinji Energy in 2026 Electricity Reform” (https://caifuhao.eastmoney.com/news/20251228090735951595620)