Recently, the State Council issued "Opinions on Further Revitalizing Existing Assets and Expanding Effective Investment", pointing out that establishing and improving the water price formation mechanism of water conservancy projects that is compatible with the investment and financing system will promote the economical utilization of water resources and the benign operation of water conservancy projects.

Before that, the National Development and Reform Commission, the National Energy Administration and other nine departments jointly issued the "Tenth Five-Year Plan for Renewable Energy Development", proposing to carry out pilot projects such as hydropower, wind power, solar energy and pumped storage power station infrastructure real estate investment trust funds.

The Ministry of Water Resources also issued the Guiding Opinions on Promoting the Pilot Work of Investment Trust Funds for Water Infrastructure (REITs).

As a representative asset in the fields of clean energy and water conservancy infrastructure, the attempt to combine hydropower infrastructure with public offering REITs has attracted much attention from the market.

the market capacity is considerable

from the point of view of hydropower supply, hydropower resources are abundant, which provides a rich asset reserve for public offering REITs.

according to the review results of water resources of the people's Republic of China (23), the exploitable amount of water resources technology in Chinese mainland is 542 million kilowatts. According to the data of National Energy Administration, by the end of December 221, the installed capacity of hydropower in China was about 39 million kilowatts.

from the demand side of hydropower, the demand for hydropower will remain stable for a long time.

under the background of peak carbon dioxide emissions and carbon neutrality, and with the support of China's renewable energy development plan in the 14th Five-Year Plan, it is expected that the hydropower market capacity will be further expanded in the future.

Main factors affecting valuation

The overall logic of hydropower asset valuation is clear, but there are still many details to be considered.

first of all, the determination of hydropower revenue period is still inconclusive. The determination of the benefit period needs to comprehensively consider the economic service life of the dam and the life of the hydropower resources development right.

secondly, the influencing factors of cash flow of hydropower assets are complex. From the income side, the income of hydropower assets is mainly affected by two factors: electricity sales and electricity price.

among them, the amount of electricity sold is affected by hydrometeorological conditions, electricity demand, dispatching of upper and lower cascade hydropower stations and other factors. If the upper and lower cascade hydropower stations belong to the same owner, but not all of them are packaged and issued with public REITs, there will be competition in the same industry.

the electricity price may change with the changes of national macro-policies, electricity price mechanism of provinces and cities, electricity supply and demand and other factors.

in addition to the above aspects, there are also issues such as the choice of discount rate and the adjustment of depreciation period that need to be considered in combination with the actual situation.

As a representative asset in the fields of clean energy and water conservancy infrastructure, hydropower infrastructure's long-term stable cash flow matches the characteristics of public offering REITs very well.

on the first anniversary of the listing of the first batch of public offering REITs in China, all parties in the market are also expecting the early launch of the first public offering REITs of hydropower assets in China, which will bring new "living water" to the public offering REITs market and hydropower industry.

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