7.4 billion yuan! South Grid Energy Storage strikes again

(Source: China Electric Power News)

Reprinted from China Electric Power News

China Energy News (Reporter: Yi Yuntong) announced on March 16 that China Southern Power Grid Co., Ltd., through its listed pumped storage platform Southern Power Grid Energy Storage Co., Ltd. (hereinafter referred to as “Southern Grid Energy Storage”), plans to invest 7.379 billion yuan to build the Guangdong Xinfeng Pumped Storage Power Station project. The capital contribution ratio is 20%, with the remaining 80% financed through bank loans. The planned installed capacity is 1.2 million kilowatts, consisting of four 300,000-kilowatt units.

The project has been included in the National Energy Administration’s “Medium- and Long-Term Development Plan for Pumped Storage (2021-2035)” and received approval from the Guangdong Development and Reform Commission this year. It is expected to be fully completed and put into operation during the “14th Five-Year Plan” period. Due to its proximity to the West Guangdong nuclear power base and wind-rich areas, the completed station will facilitate the integration of nuclear and wind power, and help prevent grid disturbances caused by long-distance power transmission from western China, enhancing the grid’s emergency response capabilities.

“The project is located in the western region of Guangdong, with a large reservoir capacity and the ability for weekly regulation,” the announcement states. This means that after completion, the station can provide regulation support for several days or even a week, playing an important role in ensuring the safety of Guangdong’s power system and supporting the construction of a new power system. Additionally, the project involves significant investment and stable tax revenue during operation, which can effectively boost local economic growth and improve infrastructure conditions in the surrounding areas.

Southern Grid Energy Storage said that investing in the Guangdong Xinfeng Pumped Storage project aligns with the company’s strategic layout and planning goals, and will help further expand its main business and enhance core competitiveness. However, after the project is completed and operational, the company is expected to have related-party transactions with Guangdong Power Grid Co., Ltd. Additionally, since the provincial-level capacity electricity price for pumped storage in Guangdong has not yet been clarified, there are still uncertainties regarding the project’s financial returns.

“According to Document No. 114 (‘Notice on Improving the Capacity Electricity Price Mechanism for Power Generation’), the revenue of the Guangdong Xinfeng Pumped Storage project includes capacity electricity fees and market trading income. As of the date of this announcement, the provincial price authorities in Guangdong have not yet clarified the unified capacity electricity price for pumped storage, and electricity market trading remains uncertain. Based on current conditions, research tools, and methods, the company estimates that the internal rate of return on capital over the 40-year operating period will be between 4.56% and 5.69%,” the announcement states.

Editor: Shen Xinrui