Energy saving & environment protection: an investor guide
China's energy saving and environmental protection industry is well positioned to blossom in the near future. In October, the government announced a plan to accelerate the development of seven strategic emerging industries, with the energy saving and environmental protection industry flagged as the first priority. This report is meant to help investors understand technology basics, fundamental drivers, market dynamics, and potential investment opportunities in 10 kinds of energy saving and environmental protection methods.
Energy savings investment opportunities and key beneficiaries
China's energy intensity is among the highest in the world. Alongside fast economic growth, China has become increasingly dependent on imported energy supply. After the 20% reduction target set in the 11th Five-Year Plan, the government plans to reduce its energy intensity in the 12th and 13th Five-Year periods by approximately 15%. Another reason for China to promote energy savings is to ensure that the country meets its 40-45% carbon intensity reduction target by 2020. In this report, we discuss five key energy saving methods - waste heat recovery, LED, ground source heat pumps, frequency inverter, and energy efficient building materials - and have identified 40+ listed players with significant business exposures.
Environmental investment opportunities and key beneficiaries
Despite achieving a remarkable double-digit GDP growth rate, China's pollution has been increasing rapidly, and the social loss for China that is associated with pollution is estimated to be 4-6% of GDP, according to the World Bank. The Chinese government has undertaken a variety of methods to achieve its energy intensity and environmental targets. In the 12th Five-Year Plan, China may more than double its investments in the pollution treatment industry to Rmb3,100bn. In this report, we cover three key environmental protection areas - waste water treatment, solid waste treatment, and exhaust gas treatment - and have identified 20+ listed players with significant business exposures.
Smart grid and waste recycling serve both needs; EMC accelerates energy saving products
China's smart grid plan aims to accommodate renewable energy in a more seamless manner and transmit electricity more efficiently, which play a role in both energy savings and environmental protection. Similarly, waste recycling preserves the environment and conserves energy. We have identified 10+ listed players in these two areas. We also examine Energy Management Contract (EMC), the new business model to promote energy saving product sales.
Eoin Treacy's view All of the Hong Kong, USA and German listed companies mentioned in this report
can be found in the Chart Library. To save time here are the results of a Chart
Library Performance Filter containing all the relevant shares listed outside
the Chinese mainland exchanges.
A great deal of commentary, particularly that emanating from the USA and Europe, views China either as a direct threat or a risk to the global economy. However, China's development is multifaceted, manufacturing is quickly moving up the value chain and the country is increasingly competing in industries which were once the preserve of so called 'developed' economies.
China is already a serious competitor in the solar and wind turbine industries and this report illustrates the clear intention to compete in just about every area of the developing environmental sector from energy efficiency to waste management and water purification.
Sewage water treatment, waste-to-energy and solid waste disposal company China Everbright International remains one of the better performing shares mentioned in this report. It is retesting its 2007 and 2009 highs and a sustained move below the 200-day MA currently near HK$3.70 would be required to question medium-term upside potential.