China's mega dam project in Tibet sparks hydropower stock surge

The Star

a day ago

China's construction of the world's largest hydropower dam in Tibet has boosted related stocks, as analysts predict that infrastructure construction companies, energy developers, and power grid equipment manufacturers would benefit from the substantial investment into what Beijing calls the 'project of the century'.
Chinese Premier Li Qiang on Saturday announced the start of the project, situated on the lower reaches of the Yarlung Tsangpo River, which becomes the Brahmaputra River as it leaves Tibet and flows south into India and finally into Bangladesh, state news agency Xinhua reported.
The project features five cascade hydropower stations, with a total estimated investment of about 1.2 trillion yuan (US$167 billion) and an anticipated annual electricity generation capacity of 300,000 gigawatt-hours, according to Xinhua.
This makes it the world's largest hydropower facility, with five times the investment and three times the capacity of China's current largest dam, the Three Gorges Dam.
Stock prices in China's infrastructure construction and hydropower sectors surged when trading resumed on Monday following the announcement.
Shares of Power Construction Corporation of China, a state-owned developer involved in the project, jumped 10 per cent to reach the daily limit on both Monday and Tuesday. Companies specialising in hydro equipment, such as Dongfang Electric, and cement firms, including Huaxin, also saw significant price gains on Monday.
'This project will be conducive to boosting [China's] economy and raising the national clean energy mix,' said Citigroup analyst Pierre Lau in a research note on Tuesday. In addition to the 1.2 trillion yuan investment in construction, Citi anticipated an additional 768 billion yuan in investments to build power grids, spurred by the initiative.
As the world's largest carbon emitter, China is rapidly expanding its renewable energy sector to meet national goals of peaking emissions by 2030 and achieving net-zero emissions by 2060, while also stabilising its power supply.
The country is the world's leading hydropower producer. It added 14.4 gigawatts of new capacity last year and is poised to exceed its target of 120 gigawatts in pumped storage hydropower by 2030, according to data from the International Hydropower Association.
Citi expected the dam project and the substantial related investments to benefit hydropower plant and grid equipment manufacturers in China, including Dongfang Electric, Sieyuan Electric, Pinggao Group, and XJ Electric.
However, some analysts cautioned that market enthusiasm could wane in the coming weeks, given the project's lengthy construction timeline, which could extend beyond a decade. The project has also raised concerns among downstream countries, including India, regarding water supply and environmental impact.
'While the hydro project is applauded as a significant step towards China's decarbonisation goals, it is important for investors to monitor its environmental impact management from a long-term view,' wrote Daiwa analyst Dennis Ip and his colleagues in a note on Tuesday. - SOUTH CHINA MORNING POST