We can't stop talking about how China is excelling in various fields recently. With a population of 1.4 billion people working long hours, China has a clear advantage over some American workers who believe Silicon Valley founders "work too much". Not only does China have the advantage of numbers, but its economic policies are also becoming more progressive. While the U.S. talks about reviving the coal industry, China is moving towards renewable energy. As the world's largest producer and consumer of electricity, China produces about 1.5 times more electricity than the U.S. Moreover, Chinese electricity is cheap, which is why they dominate in bitcoin mining.
China's excess electricity capacity is a blessing and a curse. Currently, most regions in China have 10-40% excess capacity compared to peak demand, and this capacity is expected to increase by 20% by 2020. The challenge lies in what to do with this surplus electricity. Storing or transporting excess electricity is expensive, especially when it comes to renewables, as the wind doesn't always blow and the sun doesn't always shine. To address this, China plans to use ultra-high voltage (UHV) cable technology to transport electricity across vast distances. China has invested $123 billion since 2013 to expand its reach to foreign electricity grids, with the goal of achieving a global electricity grid supplied by renewable sources.
Investing in Chinese electric utility companies seems like a promising long-term bet. China has 1.4 billion consumers who need electricity, and as the country focuses more on renewable energy, the demand for electricity will only increase. Additionally, investing in utilities provides exposure to China's growth story and offers potential income. Now let's take a look at some of the top Chinese electric companies.
China Shenhua Energy is China's leading coal mining, trading, and electricity company. With a market cap of $59 billion, it posted revenues of $38 billion and a profit of $8.7 billion in 2017. The company operates a vertically integrated business model and has an average yield of 5.06% over the past five years.
China Yangtze Power Co is the largest listed hydropower company worldwide. With a market cap of $54 billion, it reported revenues of $7.6 billion and a profit of $3.4 billion in 2017. It owns and operates the world's largest hydropower plant, the Three Gorges Dam.
China National Nuclear Power builds and operates nuclear power plants. With a market cap of $13 billion, it posted revenues of $5 billion and a profit of $680 million in 2017. The company has 14 operating power units and 11 new units under construction.
Huaneng Power International Inc is one of China's largest independent power producers, generating electricity from various sources. With a market cap of $13 billion and an installed capacity of 104,301 MW, it posted a revenue of $22 billion and a profit of $264 million in 2017.
China General Nuclear Power Corporation is a nuclear power generation company with a market cap of $11.7 billion. It manages 20 nuclear power generating units and is in the process of constructing 8 more. The company also runs various international renewable energy projects.
Investing in utilities can be attractive for income investors due to consistent dividends. While it was challenging to find historical dividend information for Chinese companies, the average yield and current yield provide some insight into dividend consistency. China's focus on disruptive technologies makes it a compelling investment theme worth exploring.
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