New energy installations double, but profit contribution drops significantly. What's going on with this power "little giant"?

Why is Profit Declining Despite a Surge in New Energy Installations?

One of the “Four Little Tycoons” in the electricity sector, China Resources Power (HK: 00836), still has strong earning capabilities, but its “engine” has changed.

According to information from Huaxia Energy Network, on March 18, China Resources Power announced its 2025 performance, with an annual revenue of HKD 102.01 billion, a year-on-year decrease of 3.11%. Among this, the core business profit attributable to shareholders was HKD 15.243 billion, a year-on-year increase of 9.9% compared to 2024.

What surprised the outside world was the dramatic change in the profitability of China Resources Power’s core business: the profit attributable to shareholders from the renewable energy business was HKD 7.604 billion, a decrease of 17.6% compared to 2024; the profit attributable to shareholders from thermal power was HKD 7.639 billion, an increase of 64.7% compared to 2024.

This stands in stark contrast to the situation in previous years. In 2021 and 2022, due to soaring coal prices, the entire power generation sector suffered net losses of hundreds of billions, while China Resources Power stood out with its excellent performance in renewable energy generation, achieving continuous profitability.

Just three years later, however, China Resources Power’s renewable energy business has dimmed, with profits declining even as installed capacity has grown several times; the thermal power business, once underestimated by outsiders, has experienced a turnaround, becoming extremely profitable.

So, what is the reason behind this? How long will this trend continue?

Crisis of Declining Profit in New Energy

2021 was a highlight year for China Resources Power.

That year, the core listed companies of the five major power generation groups all turned from profit to loss. Among them, Datang International Power Generation (SH: 601991) lost HKD 9.264 billion, a staggering decline of 404.71%, the largest decrease; while Huaneng Power International (SH: 600011) had the largest loss, reaching HKD 10.264 billion.

China Resources Power, however, achieved revenue of HKD 89.8 billion that year, a year-on-year increase of 29.1%; although net profit dropped 79% year-on-year, it still made a profit of HKD 1.593 billion. Specifically, the profit decline was mainly due to a loss of HKD 5.942 billion in thermal power business, which turned from profit to loss, while the renewable energy business contributed HKD 8.381 billion in profit, a substantial year-on-year increase of 85.4%.

In simple terms, it was the strong performance of renewable energy that allowed China Resources Power to maintain profitability in the tumultuous year of 2021, which was rare at the time.

In the following three years, benefiting primarily from the good performance of renewable energy, China Resources Power’s earning power soared: in 2022, net profit was HKD 7.042 billion (with renewable energy profit of HKD 8.645 billion); in 2023, net profit was HKD 11.003 billion (with renewable energy profit of HKD 9.726 billion); in 2024, net profit was HKD 14.388 billion (with renewable energy profit of HKD 9.228 billion).

Of course, while China Resources Power’s renewable energy profits were on a roll, subtle changes were already occurring: compared to the HKD 9.726 billion profit in 2023, there was a decline of about HKD 0.5 billion to HKD 9.228 billion in 2024. Although the decrease was small, the signal significance was clear.

In 2025, this trend continued and expanded. In 2025, the profit from China Resources Power’s renewable energy business was HKD 7.604 billion, a significant decrease of 17.6% compared to 2024.

It is noteworthy that the profit decline occurred even as installed capacity continued to rise. By the end of 2021, China Resources Power’s wind and solar energy installed capacity was 15.44 million kilowatts. By the end of 2025, the installed capacity had increased to 44.851 million kilowatts (in just 2025 alone, the renewable energy installed capacity increased by 13.625 million kilowatts), which is 2.9 times that of 2021.

On March 18, China Resources Power held its 2025 annual performance press conference in Hong Kong (image source: official website).

With the installed capacity tripling, why did profits decline? There are three main reasons:

First, electricity prices have fallen sharply. Over the past few years, the comprehensive electricity price for renewable energy has significantly dropped from the previous benchmark coal-fired price to as low as 0.2 yuan or even lower;

Second, the curtailment rate has risen. By the end of 2025, in many provinces and cities, the curtailment rate for wind and solar energy has exceeded 30% or even more.

Third, the hours of renewable energy generation have decreased. In 2025, the average utilization hours of China Resources Power’s wind farms was 2,307 hours, a year-on-year decrease of 24 hours; the photovoltaic power stations had 1,296 hours, a year-on-year decrease of 119 hours. Although these two figures remain above the national average level, the profit margins of the renewable energy business have been significantly compressed.

As the trend of increasing curtailment rates and decreasing electricity prices for renewable energy continues across the country, the decline in the profitability of China Resources Power’s renewable energy business may persist.

The “Printing Press” of Coal Power is Back in Action

Amid the significant turmoil in new energy, China Resources Power’s coal power business is steadily regaining its earning capabilities.

By the end of 2025, China Resources Power had a total thermal power installed capacity of 44.796 million kilowatts, comparable to the 44.851 million kilowatts of renewable energy installed capacity. In 2025, the profit from China Resources Power’s thermal power business was HKD 7.639 billion, a significant increase of 64.7% compared to HKD 4.639 billion in 2024. Notably, the core profit growth of the pure thermal power business (excluding coal) was even higher, reaching 79.8%, contributing HKD 7.336 billion in profit.

The dramatic increase in thermal power profitability is attributed to a key metric—the widening gap between electricity and fuel prices, meaning the difference between electricity prices and fuel costs has increased. In 2025, the electricity price difference for China Resources Power’s coal-fired power plants was RMB 148.7 per megawatt-hour, an increase of RMB 11.1 year-on-year. “This is mainly because the decline in coal prices has outpaced the decline in electricity prices, and coal consumption has decreased year-on-year,” stated China Resources Power.

In 2021 and 2022, the peak price of thermal coal was RMB 1,300 per ton, but it has now dropped to RMB 700 to 800 per ton. With coal prices down and the benchmark coal-fired electricity prices not experiencing significant declines, the profitability of coal power has stabilized, and the once “printing press” is roaring back to life.

Revenue and profit situation of China Resources Power since its listing (2003-2024) (source: official website).

Of course, the stabilization of coal power profitability is also supported by capacity price policies. In 2024, the state introduced a capacity price for coal power, significantly benefiting coal power enterprises; in 2026, the compensation standard for coal power capacity prices was raised from the initial 30% to 50%. Going forward, with the dual support of low coal prices and high standard coal power capacity prices, coal power profitability will become even more stable.

Another factor contributing to the recovery of coal power profitability, which is difficult for the outside world to observe, is the relatively stable generation of coal power compared to the dramatic increase in renewable energy curtailment rates. Coal power, designated as a “ballast,” is less likely to worry about significant increases in curtailment rates like renewable energy.

For example, the 2026 guidelines for long-term electricity contracts propose that coal-fired power generation companies’ annual contracts should not be less than 70% of the previous year’s on-grid electricity, and monthly and above contracts should not be less than 80% of the anticipated marketized electricity. This “contract signing ratio requirement for coal power” effectively determines the system proportion of coal power generation.

Currently, in China’s electricity structure, the proportion of non-marketized electricity exceeds 30%, and the marketized electricity proportion is about 66%. Within the marketized electricity, long-term contracts account for nearly 90%, while the spot market accounts for nearly 10%. In long-term contract electricity, coal power is rigidly mandated to have a high proportion to ensure electricity safety and supply, which also indirectly limits the proportion of renewable energy electricity.

The return of coal power profitability has allowed China Resources Power to maintain overall profitability stability. However, the significant degradation of profitability in renewable energy has directly changed the direction of China Resources Power’s business. The company’s new energy installation target for 2026 is set at 5 million kilowatts, a significant reduction compared to the 13.625 million kilowatts of new renewable energy installations in 2025. Such a shift in attitude is a bad signal for the development of the renewable energy industry.

Author’s statement: Personal views, for reference only.